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UNIT- I

Concept of Entrepreneurship
Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most prominent
example of entrepreneurship is the starting of new businesses.

In economics, entrepreneurship connected with land, labour, natural resources and

capital can generate a profit. The entrepreneurial vision is defined by discovery and risk-
taking and is an indispensable part of a nation’s capacity to succeed in an ever-changing
and more competitive global marketplace.

Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and desire to establish,
administer and succeed in a startup venture along with risk entitled to it, to make profits.
The best example of entrepreneurship is the starting of a new business venture. The
entrepreneurs are often known as a source of new ideas or innovators, and bring new
ideas in the market by replacing old with a new invention.
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It can be classified into small or home business to multinational companies. In economics,

the profits that an entrepreneur makes is with a combination of land, natural resources,
labour and capital.

In a nutshell, anyone who has the will and determination to start a new company and
deals with all the risks that go with it can become an Entrepreneur.

What are the 4 Types of Entrepreneurship?

It is classified into the following types:

Small Business Entrepreneurship-

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter,
plumber, electrician, etc. These people run or own their own business and hire family
members or local employee. For them, the profit would be able to feed their family and not
making 100 million business or taking over an industry. They fund their business by taking
small business loans or loans from friends and family.

Scalable Startup Entrepreneurship-

This start-up entrepreneur starts a business knowing that their vision can change the
world. They attract investors who think and encourage people who think out of the box. The
research focuses on a scalable business and experimental models, so, they hire the best
and the brightest employees. They require more venture capital to fuel and back their
project or business.

Large Company Entrepreneurship-

These huge companies have defined life-cycle. Most of these companies grow and
sustain by offering new and innovative products that revolve around their main products.
The change in technology, customer preferences, new competition, etc., build pressure for
large companies to create an innovative product and sell it to the new set of customers in
the new market. To cope with the rapid technological changes, the existing organisations
either buy innovation enterprises or attempt to construct the product internally.

Social Entrepreneurship-
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This type of entrepreneurship focuses on producing product and services that resolve
social needs and problems. Their only motto and goal is to work for society and not make
any profits.

Characteristics of Entrepreneurship:
Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

• Ability to take a risk- Starting any new venture involves a considerable amount of
failure risk. Therefore, an entrepreneur needs to be courageous and able to
evaluate and take risks, which is an essential part of being an entrepreneur.
• Innovation- It should be highly innovative to generate new ideas, start a company
and earn profits out of it. Change can be the launching of a new product that is
new to the market or a process that does the same thing but in a more efficient
and economical way.
• Visionary and Leadership quality- To be successful, the entrepreneur should have
a clear vision of his new venture. However, to turn the idea into reality, a lot of
resources and employees are required. Here, leadership quality is paramount
because leaders impart and guide their employees towards the right path of
success.
• Open-Minded- In a business, every circumstance can be an opportunity and used
for the benefit of a company. For example, Paytm recognised the gravity of
demonetization and acknowledged the need for online transactions would be
more, so it utilised the situation and expanded massively during this time.
• Flexible- An entrepreneur should be flexible and open to change according to the
situation. To be on the top, a businessperson should be equipped to embrace
change in a product and service, as and when needed.
• Know your Product-A company owner should know the product offerings and also be
aware of the latest trend in the market. It is essential to know if the available product
or service meets the demands of the current market, or whether it is time to tweak it a
little. Being able to be accountable and then alter as needed is a vital part of
entrepreneurship.

Importance of Entrepreneurship:

• Creation of Employment- Entrepreneurship generates employment. It provides an

entry-level job, required for gaining experience and training for unskilled workers.
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• Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.
• Impact on Society and Community Development- A society becomes greater if
the employment base is large and diversified. It brings about changes in society
and promotes facilities like higher expenditure on education, better sanitation,
fewer slums, a higher level of homeownership. Therefore, entrepreneurship assists
the organisation towards a more stable and high quality of community life.
• Increase Standard of Living- Entrepreneurship helps to improve the standard of
living of a person by increasing the income. The standard of living means, increase
in the consumption of various goods and services by a household for a particular
period.
• Supports research and development- New products and services need to be
researched and tested before launching in the market. Therefore, an entrepreneur
also dispenses finance for research and development with research institutions and
universities. This promotes research, general construction, and development in the
economy.

What are Functions of Entrepreneur?

Entrepreneurs drive economic growth by unlocking business potential through innovation, risk-taking, and
leadership. They network, strategically plan, and optimize resources to create value, adapt to change, and
overcome challenges on their path to success. Embrace these essential entrepreneurial functions and ignite
your entrepreneurial spirit for a thriving venture. Let’s explore functions of entrepreneur with examples.

Entrepreneurship is a vital force that drives economic development and shapes the business landscape.
Entrepreneurs are visionary individuals who identify opportunities, take calculated risks, and bring innovative
ideas to life. They play a crucial role in creating and expanding businesses, generating employment
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opportunities, and fostering economic growth. In this article, we will explore the essential functions of
entrepreneur and examine how each function contributes to the success of a business venture. Functions of
Entrepreneur

A. Entrepreneurial Functions
Innovations

The first function of entrepreneur is the ability to introduce new ideas, products, processes, or business models
into the market. It involves identifying opportunities for improvement and creating solutions that meet
customer needs in a unique way.

Example: Elon Musk’s Tesla, revolutionized the automotive industry by introducing electric vehicles with
cutting-edge technology.
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Risk-Taking

Entrepreneurs are willing to take calculated risks and make decisions with uncertain outcomes to pursue
opportunities. They understand that the potential for rewards often comes with inherent risks.

Example: Richard Branson’s Virgin Group, which expanded from a small record store to a diverse
conglomerate encompassing airlines, media, telecommunications, and more, despite the risks associated with
entering various industries.

Organisation Building

Entrepreneurs are responsible for building and managing organizations to bring their ideas to fruition. This
involves assembling a team, creating a structure, and establishing processes to ensure the efficient operation of
the venture.

Example: Mark Zuckerberg’s Facebook started as a small dorm room project and grew into a global social
media platform with thousands of employees and a complex organizational structure.

B. Promotional Functions
Investigation of Ideas

Entrepreneur’s function is to systematically explore and evaluate business ideas to assess their feasibility and
potential. They gather information, conduct market research, analyze trends, and evaluate the viability of their
ideas before proceeding.

Example: Before launching Airbnb, the founders conducted extensive research on the travel and
accommodation industry to identify the market gap and validate the concept of peer-to-peer home-sharing.

Detailed Investigation

Once an idea is identified, entrepreneurs analyse the market, target audience, competition, and potential risks.
They gather detailed information to understand the business environment and make informed decisions
comprehensively.

Example: Jeff Bezos extensively studied the e-commerce market and its potential growth before founding
Amazon. He conducted thorough research to identify the best product categories and built a robust
infrastructure to support the online retail platform.
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Assembling Requirements

It’s another function of entrepreneurs where they work towards gathering the necessary resources, including
human capital, technology, raw materials, and suppliers, to bring their ideas to life. They carefully select and
assemble the required elements for their venture’s success.

Example: The founders of Warby Parker, an online eyewear company, assembled a network of manufacturers,
designers, and suppliers to create a streamlined supply chain and provide affordable, stylish glasses to
customers.

Financing the Proposition

Entrepreneurs explore different avenues to secure funding for their ventures. They develop a compelling
business case and pitch their ideas to potential investors, lenders, or venture capitalists. They may also use
personal savings, crowdfunding platforms, or seek partnerships to finance their proposition.

Example: Elon Musk’s SpaceX raised significant capital through private investments and government contracts
to finance the development and launch of advanced rockets and spacecraft, enabling the company to pursue its
ambitious space exploration goals.

C. Managerial Function
Planning

Planning is a function of entrepreneurs where they engage in strategic planning to set goals, define objectives,
and establish a roadmap for their venture. They anticipate future challenges, identify opportunities, and
develop strategies to achieve their vision.

Example: Steve Jobs meticulously planned the launch of the iPhone, setting clear goals, designing a
comprehensive marketing strategy, and coordinating the development process to revolutionize the
smartphone industry.

Organizing

Entrepreneurs organize resources, tasks, and responsibilities to ensure the effective execution of their plans.
They create organizational structures, delegate roles, and establish workflows to optimize operations.

Example: Larry Page and Sergey Brin, the founders of Google, established a clear organizational structure with
specialized teams and departments to manage various aspects of the business, allowing for efficient
collaboration and innovation.
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Staffing

Entrepreneurs use staffing by identifying talent, recruiting suitable individuals, and building a skilled
workforce. They recognize the importance of assembling a team with diverse skills and expertise to drive the
growth and success of their venture.

Example: Reed Hastings, the co-founder of Netflix, strategically built a team of talented professionals in
technology, content creation, and marketing to disrupt the traditional television industry and establish a global
streaming platform.

Directing

Another function of entrepreneurs is to provide leadership and direction to their teams, guiding and inspiring
them to achieve organizational goals. They communicate the vision, set performance expectations, and clarify
roles and responsibilities.

Example: Oprah Winfrey used her influential platform to direct and inspire her team at Harpo Productions,
fostering a creative and collaborative environment that led to the production of successful television shows and
the establishment of a media empire.

Leadership

Entrepreneurs exhibit leadership qualities by inspiring and motivating their teams. They lead by example,
create a positive work culture, and empower employees to unleash their potential.

Example: Jack Ma, the co-founder of Alibaba, demonstrated visionary leadership by inspiring his team to
embrace e-commerce and transform the Chinese market. His leadership style fostered innovation,
collaboration, and a customer-centric approach.

Communication

Entrepreneurs communicate their vision, goals, and expectations effectively to their team members,
stakeholders, and customers. They ensure open lines of communication, listen actively and convey information
clearly to drive alignment and collaboration.

Example: Mary Barra, the CEO of General Motors, emphasizes transparent communication to foster a culture of
trust and collaboration, enabling the company to navigate challenges and drive innovation.
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Motivation

Entrepreneurs employ various techniques to inspire and energize their team members. They recognize and
reward achievements, provide constructive feedback, and create a supportive work environment.

Example: Richard Branson, the founder of Virgin Group, motivates his employees by encouraging a work-life
balance, promoting creativity, and offering opportunities for personal growth and development.

Supervision

Entrepreneurs engage in the supervision of their operations, ensuring that tasks are being performed
effectively and efficiently. They provide guidance, monitor progress, and intervene when necessary to maintain
quality and productivity.

Example: Tony Hsieh, the late CEO of Zappos, implemented a unique supervisory approach by fostering a
culture of self-management, empowering employees to take ownership of their work and deliver exceptional
customer service.

Co-ordination

Entrepreneurs coordinate the activities of different departments, teams, and stakeholders to ensure synergy
and alignment. They facilitate collaboration, resolve conflicts, and ensure that all parts of the organization work
harmoniously towards common goals.

Example: Phil Knight, the co-founder of Nike, implemented effective coordination strategies to synchronize the
efforts of design, manufacturing, and marketing teams, enabling the company to deliver innovative products
and maintain its competitive edge.

Controlling

Entrepreneurs implement control mechanisms to monitor progress, evaluate performance, and ensure that
outcomes align with set goals. They establish key performance indicators, analyze data, and make necessary
adjustments to maintain efficiency and effectiveness.

Example: Elon Musk exercises strong control over Tesla’s production processes, employing advanced data
analytics and quality control measures to ensure that the company delivers high-quality electric vehicles to its
customers.
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D. Commercial Functions
Production

Entrepreneurs engage in production activities, which involve the conversion of inputs into goods or services.
They manage the production process, optimize efficiency, and ensure the delivery of high-quality products.

Example: Henry Ford revolutionized the production process by introducing the assembly line, enabling mass
production of automobiles such as the Model T.

Finance

Entrepreneurs handle financial functions such as managing funds, raising capital, and making financial
decisions to support their ventures. They analyze financial data, develop budgets, and seek opportunities for
investment and growth.

Example: Elon Musk’s SpaceX secured substantial funding from investors and government contracts to finance
the development of reusable rockets and advance space exploration.

Marketing

Entrepreneurs use marketing activities to promote and sell their products or services. They conduct market
research, develop marketing strategies, and communicate the value proposition to target customers.

Example: Steve Jobs transformed Apple’s marketing approach by creating a strong brand image, captivating
advertisements, and innovative product launches that generated high demand and customer loyalty.

Personnel

Entrepreneurs manage personnel functions, including recruitment, training, and performance management.
They build and nurture a talented workforce, aligning skills with business needs.

Example: Jeff Bezos prioritized talent acquisition and development at Amazon, fostering a culture of
innovation and customer focus through comprehensive employee training programs.

Accounting

Entrepreneurs oversee accounting functions to maintain financial records, track revenues and expenses, and
ensure compliance with financial regulations. They analyze financial statements and use financial data to make
informed business decisions.Example: Sara Blakely, the founder of Spanx, leveraged her accounting skills to
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manage the financial aspects of her business, tracking costs and profitability to drive strategic
growth. reneurship

Entrepreneurship is the willingness and ability to establish, organise and manage a

business and take financial risks to make profits. An Entrepreneur is an innovator who brings
in new ideas to create a successful business venture.

We have compiled some multiple-choice questions and answers on entrepreneurship to

help students understand the concept better:

1. Which of these is not a type of entrepreneurship?

a. Small business entrepreneurship
b. Scalable entrepreneurship
c. Large scale entrepreneurship
d. Intrapreneurship

Answer: d

2. Which of these actions of an entrepreneur will most likely result in creative

destruction?
a. Developing a new product
b. Taking over a competitor’s business
c. Issuing shares to individuals and institutions
d. Lowering prices of your product or service

Answer: a

3. According to Schumpeter, innovative entrepreneurs would:

a. Thrive in the market
b. Not survive and disappear from the market.
c. Get absorbed within larger innovative businesses
d. Get absorbed within non-innovative businesses

Answer: c

4. Which of these is not a challenge for the entrepreneur?

a. Managing the cash flow of their business
b. Recruiting new employees
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c. Choosing the product or service to sell in the market

d. Formulating rules and regulations relating to conducting entrepreneurship in
their country

Answer: d

5. Which of these theories involve taking a moderate amount of risk as a function of skill
and not chance?
a. Need for achievement
b. Need for affiliation
c. Need for authority
d. Need for independence

Answer: b

6. Which of these is not a category of external forces that affects a business?

a. Competitive forces
b. Technological forces.
c. Economic forces
d. Socio-economic forces

Answer: b

7. Which among these is a money manager who is involved in making risk investments
from equity capital with the objective of gaining better returns?
a. Entrepreneur
b. Businessperson
c. Buyer
d. Venture capitalist

Answer: d

8. Andrew Carnegie belonged to this century:

a. 16th to 17th Century
b. 20th to 21st Century.
c. 17th to 18th Century
d. 19th to 20th Century

Answer: d
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9. Which of these is the first activity of a new business?

a. Departure point
b. Goal Orientation
c. Business skill development
d. None of the above

Answer: a

10. Who should be involved in preparing a firm’s business plan?

a. Accountant
b. Engineer
c. Entrepreneur
d. None of the above

Answer: c

11. What should be the main worry of a company’s founder who asks for capital in
exchange for equity shares in their venture?
a. Valuation
b. Control
c. Capitalisation
d. Legal formalities

Answer: c

12. The process of creating something new is called:

a. Creative flexibility
b. Management
c. Business
d. Innovation

Answer: d

13. Ownership position of less than 50 per cent in a business is known as:
a. Majority Interest
b. Joint Venture
c. Minority Interest
d. None of the above
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Answer: c

14. Which of these is also known as corporate venturing?

a. Intrapreneurship
b. Mergers
c. Entrepreneurship
d. Acquisition

Answer: a

15. If an entrepreneur takes decisions on behalf of their enterprise, it is known as

______:
a. Routine decisions
b. Strategic decisions
c. Organisational decisions
d. Personal decisions

Answer: c

16. Entrepreneurship Development Program is helpful for:

a. First-generation entrepreneurs
b. Future generation entrepreneurs
c. Existing Entrepreneurs
d. None of the above

Answer: a

17. These decisions are concerned with policy matters and they influence the goals and
objectives of a business venture:
a. Routine decisions
b. Strategic decisions
c. Organisational decisions
d. Personal decisions

Answer: b

18. Ownership position of more than 50 per cent in a business is known as:
a. Minority Interest
b. Joint Venture
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c. Majority Interest
d. None of the above

Answer: c

19. What is the purpose of a feasibility study for starting a new venture?
a. Exploring for potential customers
b. Estimate sales
c. To understand if there are any barriers to success
d. None of the above

Answer: c

20. An entrepreneur who is the owner of more than one business is called:
a. Portfolio Entrepreneur
b. Intrapreneur
c. Corporate Entrepreneur
d. None of the above

Answer: a

21. Which of the following is the type of entrepreneurship based on the risk?

1. Drone
2. Manufacturing
3. Technical
4. Macro
Ans. Drone entrepreneurship is the type that is categorized based on the risk involved. In this
type, owners are satisfied with the current pace and profit of the business and are not willing to
take a further risk.
22. Brugman is a pioneer of ….. entrepreneurship
1. Private
2. Corporate
3. Agricultural
4. Technical
Ans. Brugman is a pioneer of corporate entrepreneurship.

23. Small scale entrepreneurs have an annual turnover in the range of-
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1. Up to Rs. 5crore
2. Rs 5Crore- 75 Crore
3. Rs. 75 Crore-250 Crore
4. None of the above
Ans. If the annual turnover of entrepreneurship is in the range of Rs 5 Crore to 75 Crore then it is
known as small-scale entrepreneurship.
24. Microsoft by Bill Gates is an example of which type of entrepreneurship?
1. Innovative
2. Agricultural
3. Social
4. Joint
Ans. Microsoft is an example of innovative entrepreneurship, where the starting of a business is
completely dependent on an innovative idea and has the highest risk factor.
25. In which of the following types, does the entrepreneur work as a middle man?
1. Joint
2. Private
3. Social
4. Trading
Ans. Trading entrepreneurship is the type where a business idea works as a link between two
ends of the trading.
26. Joint effort and ownership of a private entrepreneur and Government are involved in the-
1. Social
2. Trading
3. Joint
4. Corporate
Ans.Joint entrepreneurship involves both ownership of a private entrepreneur and a
government.
27. To categorize entrepreneurship on a large scale, the annual turnover should be-
1. Below Rs 75 Crore
2. Above Rs 250 Crore
3. Between 75 to 250 Crore
4. None of the above
Ans. Large scale entrepreneurship has to have an annual turnover of greater than Rs 250 Crore

28. In which of the following types of profit is the secondary objective?

1. Private
2. Social
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3. Joint
4. Corporate
Ans. Social entrepreneurs are obligated to contribute to social development and work for a social
cause. Here profit is the secondary objective.
29. The idea of social entrepreneurship came into existence in-
1. The 1960s
2. The 1990s
3. The 1850s
4. The 1940s
Ans. Origin of social entrepreneurship dates back to around the 1960s.
30. The minimum financial interest that a woman has to have in woman entrepreneurship is-
1. 51 percent
2. 49percent
3. 50 percent
4. 60 percent
Ans. According to the rules set by the Indian government, in woman entrepreneurship, a woman
entrepreneur has to have at least 51 percent of financial interest.
31. Grameen Bank by Muhammad Yunus is an example of….entrepreneurship
1. Innovative
2. Social
3. Public
4. Joint
Ans. Grameen Bank by Muhammad Yunus is an example of social entrepreneurship.
32. The advantage of self-employment is-
1. Flexible working hours
2. Freedom to choose the type of work
3. High potential to enhance income
4. All of the above
Ans. Self-employment is very beneficial in terms of choosing our working hours, and the role and
also gives good space to enhance our income. Hence all these are advantages of self-
employment.

33.Which of the following is not an example of self-employment?

1. Doctor working at a city hospital
2. The doctor doing private practice
3. Shop owner
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4. Cafe owner
Ans. When a person is working for some other organization and taking a fixed salary, it does not
come under self-employment. Thus, a doctor working at a city hospital is not self-employed.
34. The disadvantage of self-employment is-
1. Varied business income
2. Fixed salary
3. Flexible working hours
4. None of above
Ans. In the case of self-employment, there is a risk of income fluctuation. And this is the biggest
disadvantage.
35. Which among the following is a push factor for entrepreneurship?
1. Culture
2. Passion for business
3. Displacement from job
4. Non Satisfaction from job
Ans. Push factors are reasons that demotivate someone from starting his/her own business and
hence keep a person away from entrepreneurship. Culture is one such push factor.
36. Which among the following is a pull factor for entrepreneurship?
1. Displacement from job
2. Passion for business
3. Believing in our idea
4. All of the above
Ans. Unlike the push factors, pull factors encourage us to start our entrepreneurship career. All
the above-mentioned factors indeed are necessary to motivate us for taking entrepreneurship as
a career.
37. The term entrepreneurship dates back to-
1. 1902
2. 1990
3. 1762
4. Can’t state
Ans. Though the word entrepreneur has been in existence since 1762, the term
entrepreneurship dates back to 1902

38. Paul Reynolds is the founder of-

1. Social entrepreneurship
2. Global Entrepreneurship Monitor
3. Both of the above
4. None of the above
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Ans. Paul Reynolds is the founder of Global Entrepreneurship Monitor.

39. Who is considered the father of entrepreneurship?
1. Joseph Schumpeter
2. Paul Reynolds
3. Bill Gate
4. Elon musk
Ans. Joseph Schumpeter is considered the father of entrepreneurship.
40.Entrepreneurship Development Program is to help-
1. Well established business
2. First generation entrepreurs
3. Employs of an organization
4. None of the above.
Ans. Entrepreneurship Development Program is mainly formed to help first-generation
entrepreneurs
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What is Unemployment?
Unemployment is a situation when a person actively searches for a job and is unable to find
work. Unemployment indicates the health of the economy.

The unemployment rate is the most frequent measure of unemployment. The

unemployment rate is the number of people unemployed divided by the working
population or people working under labour force.

Unemployment rate = (Unemployed Workers / Total labour force) × 100

National Sample Survey Organization (NSSO) defines employment and unemployment on

the following activity statuses of an individual. NSSO, an organization under MoSPI – Ministry
of Statistics and Programme Implementation measures India’s unemployment on three
approaches:

1. Daily Status Approach: unemployment status of a person under this approach is

measured for each day in a reference week. A person having no gainful work even for
one hour in a day is described as unemployed for that day.
2. Weekly Status Approach: This approach highlights the record of those persons who
did not have gainful work or were unemployed even for an hour on any day of the
week preceding the date of the survey.
3. Usual Status Approach: This gives the estimates of those persons who were
unemployed or had no gainful work for a major time during the 365 days.

Types of Unemployment in India

In India, there are seven types of unemployment. The types of unemployment are discussed
below:

1. Disguised Unemployment: This is a type of unemployment where people employed

are more than actually needed. Disguised unemployment is generally traced in
unorganised sectors or the agricultural sectors.
2. Structural Unemployment: This unemployment arises when there is a mismatch
between the worker’s skills and availability of jobs in the market. Many people in India
do not get job matching to their skills or due to lack of required skills they do not get
jobs and because of poor education level, it becomes important to provide them
related training.
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3. Seasonal Unemployment: That situation of unemployment when people do not have

work during certain seasons of the year such as labourers in India rarely have
occupation throughout the year.
4. Vulnerable Unemployment: People are deemed unemployed under this
unemployment. People are employed but informally i.e. without proper job contracts
and thus records of their work are never maintained. It is one of the main types of
unemployment in India.
5. Technological Unemployment: the situation when people lose their jobs due to
advancement in technologies. In 2016, the data of the World Bank predicted that the
proportion of jobs threatened by automation in India is 69% year-on-year.
6. Cyclical Unemployment: unemployment caused due to the business cycle, where
the number of unemployed heads rises during recessions and declines with the
growth of the economy. Cyclical unemployment figures in India are negligible.
7. Frictional Unemployment: this is a situation when people are unemployed for a
short span of time while searching for a new job or switching between jobs. Frictional
Unemployment also called Search Unemployment, is the time lag between the jobs.
Frictional unemployment is considered as voluntary unemployment because the
reason for unemployment is not a shortage of jobs, but in fact, the workers
themselves quit their jobs in search of better opportunities.

Aspirants preparing for UPSC Civil services exams or any government exams can check the
relevant links given below to prepare more

Causes of Unemployment

The major causes of unemployment in India are as mentioned below:

• Large population.
• Lack of vocational skills or low educational levels of the working population.
• Labour-intensive sectors suffering from the slowdown in private investment
particularly after demonetisation
• The low productivity in the agriculture sector plus the lack of alternative opportunities
for agricultural workers that makes transition among the three sectors difficult.
• Legal complexities, Inadequate state support, low infrastructural, financial and
market linkages to small businesses making such enterprises unviable with cost and
compliance overruns.
• Inadequate growth of infrastructure and low investments in the manufacturing
sector, hence restricting the employment potential of the secondary sector.
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• The huge workforce of the country is associated with the informal sector because of
a lack of required education or skills, and this data is not captured in employment
statistics.
• The main cause of structural unemployment is the education provided in schools
and colleges are not as per the current requirements of the industries.
• Regressive social norms that deter women from taking/continuing employment.

Impact Of Unemployment

The unemployment in any nation have the following effects on the economy:

• The problem of unemployment gives rise to the problem of poverty.

• The government suffers extra borrowing burden because unemployment causes a
decrease in the production and less consumption of goods and services by the
people.
• Unemployed persons can easily be enticed by antisocial elements. This makes them
lose faith in the democratic values of the country.
• People unemployed for a long time may indulge in illegal and wrong activities for
earning money which increases crime in the country.
• Unemployment affects the economy of the country as the workforce that could have
been gainfully employed to generate resources actually gets dependent on the
remaining working population, thus escalating socio-economic costs for the state.
For instance, a 1 % increase in unemployment reduces the GDP by 2 %.
• It is often seen that unemployed people end up getting addicted to drugs and alcohol or
attempts suicide, leading to losses to the human resources of the country.

Unemployment in India – Important Questions

1. Unemployment that occurs during the normal workings of an
economy as people change jobs and move across the country is called
_____.

1. structural unemployment.
2. natural unemployment
3. frictional unemployment
4. cyclical unemployment
Answer (3) Frictional unemployment
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2. The natural rate of unemployment is generally thought of as the

1. the sum of frictional unemployment and structural unemployment

2. the ratio of the frictional unemployment rate to the cyclical
unemployment rate
3. the sum of frictional unemployment and cyclical unemployment
4. the sum of structural unemployment and cyclical unemployment
Answer (1) the sum of frictional unemployment and structural unemployment

3. A sales manager of an equipment manufacturing company loses his

job because the company relocated the unit to another country is an
example of ____ unemployment.

1. Seasonal unemployment
2. Frictional unemployment
3. Cyclical unemployment
4. Structural unemployment
Answer (4) Structural unemployment

4. When the rate of unemployment increases because of recession or

depression. It is which type of unemployment?

1. Structural unemployment
2. Seasonal unemployment
3. Cyclical Unemployment
4. Frictional Unemployment
Answer (3) Cyclical Unemployment

5. Discouraged workers are not considered as a part of the labour force,

so classifying them as unemployed would

1. have an indeterminate impact on the unemployment rate

2. not change the unemployment rate
3. increase the unemployment rate
4. decrease the unemployment rate
Answer (3) increase the unemployment rate
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6. A person is capable, willing and ready to work at current wage rate is

said to be
(A) Unemployed
(B) Poor
(C) Surplus
(D) Worker
Answer:
(A) Unemployed

7. Compulsory nature of unemployment is seen in which

context of labour supply?
(A) Active
(B) Passive
(C) Children
(D) Elders
Answer:
(A) Active

8. Who presented four measuring roads of measuring types of

unemployment?
(A) Raj Krishna
(B) Mahalnobis
(C) Keynes
(D) Rodan
Answer:
(A) Raj Krishna

9. Which type of unemployment arises due to lack of effective

demand?
(A) Frictional
(B) Seasonal
(C) Cyclical
(D) Disguised
Answer:
(A) Frictional

10. Which type of production technique increase

unemployment? ‘
,

(A) Labour intensive

(B) Capital intensive
(C) Agriculture oriented
(D) Education oriented
Answer:
(A) Labour intensive

11. Which of the following is an accurate definition of a self-

employed person?

a. A self-employed person receives a salary from their employer on a

regular basis
b. A self-employed person owns as well as operate a business
c. A self-employed person is employed only for a few months in a
year
d. All of the above
Answer: b

12. Which of the following measures can help to reduce

unemployment in a country within a very short period of time?

e. Increasing the investment in both public and private sector

f. Reducing the growth rate of a country’s population
g. Reducing the inequalities in terms of distribution of wealth and
income
h. None of the above
Answer: a

13.Which of the following is the actual definition of a workforce?

i. The workforce is defined as the labour force that is employed by

another individual or organisation
j. The workforce is defined as the total population that is not
employed by another individual or organisation
k. The workforce is defined as the total population that is forced to
work by another individual or organisation
l. None of the above
,

Answer: a

14.Which of the following is a major form of livelihood for Indians

as it accounts for greater than 50 per cent of the total workforce?

m. Regular salaried employment

n. Casual wage labour
o. Self-employment
p. None of the above
Answer: c

15.Which of the following statements is not true for a worker?

a. Any person who is self-employed is not a worker

b. Any worker has the right to temporarily abstain from their work
due to any illness
c. Any person who is helping the main worker is also called a
worker
d. A worker also contributes to the gross domestic product (GDP)
of a country
Answer: a

16.Which of the following workers is a regular salaried employee?

a. A vegetable vendor
b. A cashier in a bank
c. Both a and b are incorrect
d. Both a and b are correct
Answer: b

17.Which of the following statements is true about disguised

unemployment?
a. The majority of disguised unemployed in India are found in the
agriculture sector
b. The majority of disguised unemployed in India are found in the
trade sector
,

c. The majority of disguised unemployed in India are found in the

transport sector
d. The majority of disguised unemployed in India are found in the
manufacturing sector
Answer: a

18.Which of the following statements is true about the primary

sector?
a. Mining and quarrying is a primary sector activity
b. Trade is a primary sector activity
c. Transport is a primary sector activity
d. Construction is a primary sector activity
Answer: a

19.Which of the following statements is true about unemployment

in rural India?
a. Structural unemployment is a common form of unemployment
in rural India
b. Disguised unemployment is a common form of unemployment
in rural India
c. Educated unemployment is a common form of unemployment
in rural India
d. None of the above
Answer: b

20.Which of the following statements is true about unemployment

in urban India?
a. Seasonal unemployment is a common form of unemployment
in urban India
b. Disguised unemployment is a common form of unemployment
in urban India
c. Open unemployment is a common form of unemployment in
urban India
d. None of the above
Answer: c
,

21.Which of the following statements is true about unemployment

in India?
a. Voluntary unemployment is the most common form of
unemployment in India
b. Frictional unemployment is the most common form of
unemployment in India
c. Structural unemployment is the most common form of
unemployment in India
d. Technical unemployment is the most common form of
unemployment in India
Answer: c

22.Which of the following agencies can provide the data for

unemployment in India?
a. Reports from the census of India
b. The Directorate General of Employment
c. National Sample Survey Organisation (NSSO)
d. All of the above
Answer: d

23.Which of the following statements is true about unemployment?

a. Seasonal unemployment occurs when there are more people
working in a job than is actually required
b. Open unemployment occurs when there are more people
working in a job than is actually required
c. Disguised unemployment occurs when there are more people
working in a job than is actually required
d. Educated unemployment occurs when there are more people
working in a job than is actually required
Answer: c

24.Which of the following statements is true?

a. An establishment that has four hired workers is known as an
informal sector establishment
b. An establishment that has four hired workers is known as a
formal sector establishment
,

c. Both a and b are correct

d. Both a and b are incorrect
Answer: a

25.Which of the following statements is true?

a. Seasonal unemployment occurs when some workers lose their
jobs due to the introduction of new machinery
b. Technological unemployment occurs when some workers lose
their jobs due to the introduction of new machinery
c. Mechanical unemployment occurs when some workers lose
their jobs due to the introduction of new machinery
d. Structural unemployment occurs when some workers lose their
jobs due to the introduction of new machinery
Answer: b
,

What is the meaning of wealth creation?

Wealth creation is the process of accumulation of assets, investments, and

resources over a period of time. It combines key aspects like strategic
planning, risk-taking, and long-term investment perspective for meeting the
financial goals of wealth creation. The power of compounding at the same
time starting investments at an earlier stage of one’s career is instrumental in
wealth creation over the long term. Wealth creation requires identifying and
analysing profitable investment opportunities and investing in productive
assets aligning them with financial goals at different stages of life.

What is the importance of wealth creation?

Wealth creation is important from many viewpoints like securing the future
through effective retirement planning, ensuring regular income to meet the
needs of a person and their family, and more. The importance of wealth
creation is highlighted hereunder.

1. Securing the financial future

The primary importance of wealth creation is to secure the financial future of
the person and their family. A person can create significant assets and income
opportunities as part of wealth creation to ensure financial stability even in
case of any unfortunate event. Such wealth can be used to meet unexpected
financial emergencies or expenses.

2. Meeting financial goals in a timely manner

Systematic wealth creation allows a person to meet their goals in a timely
manner. In order to meet financial goals, mere savings is not enough.
Therefore, it is important to invest in diverse investment options that are
suitable for different time frames ranging from short-term to long-term
investment horizons and align them with respective financial goals.
,

3. Promoting economic growth

Wealth creation contributes directly to the growth of the economy in the form
of job creation, increased consumer spending, increased profits for
businesses, and more. This leads to a collective environment of increasing
investment opportunities for all categories of investors.

4. Passing the wealth as an inheritance

Wealth creation allows investors to build assets and resources that they can
pass on to future generations as part of their legacy or inheritance. This
inheritance also helps in safeguarding the financial future of the following
generations.

What are the long-term strategies for wealth creation?

Some of the key strategies for long-term wealth creation are mentioned below.

1. Investing early on

The best possible wealth creation strategy is to start investing at a very early
stage. This allows the investments to grow significantly over a period of time.
Money creating money is one of the fastest easy of wealth creation and it is a
principle followed religiously by top investors across the globe.

2. Ensure a diversified portfolio

It is also equally important to not put all your eggs in one basket. A diversified
portfolio ensures optimum risk management, especially in the case of a
volatile market. A diversified portfolio allows the investor to spread the overall
risk of the portfolio and create tangible assets in the long term.

3. Invest in a correlation of personal risk parameter

Investors should also remember to do their own research while creating their
investment portfolio. The risk perception of every investor is varied and
therefore, it is important to not copy the investment portfolio of another investor
,

or blindly follow any investment advice without the backing of thorough

research. Investments that are not in correlation with individual risk perception
may not be a good addition to long-term wealth creation.

4. Keep investing regularly

Along with investing early, it is also important to keep investing regularly. It is

one of the golden principles of wealth creation to systematically add to long-
term wealth creation. This creates a discipline in saving and strategically
investing to ensure that the portfolio gets the maximum benefit of
compounding.

5. Set tangible financial objectives and stick to them

Investors should also set tangible goals that are achievable well within reason
through systematic investments over a period of time. After setting these
goals, the next step is to stick to them and to keep investing diligently to
ensure that the goals are met in a timely manner.

6. Review the portfolio from time to time and rebalance it regularly

A portfolio review is an essential exercise for investors and a crucial step in

wealth creation. This exercise helps in rebalancing the portfolio and adding
better investment products while weeding out investments that no longer align
with risk-return parameters.
,

Difference between Self Employment and Entrepreneurship

When it comes to making a living, there are different ways to go about it.
Two of them are self-employment and entrepreneurship.

Before we move to the differences, let’s understand what are Self

Employment and Entrepreneurship:

• Self Employment: Self-employment refers to a person who works

for themselves as a freelancer or sole proprietor. They typically
offer services or sell products directly to clients or customers
without being employed by a company.
• Entrepreneurship: Entrepreneurship refers to starting and running
a business that creates value for others. Entrepreneurs typically aim
to innovate and grow their businesses over time.

Major differences between Self Employment and

Entrepreneurship
Self
Entrepreneurship
Employment

Self-
Entrepreneurship
employment
involves creating
typically
and growing a
involves
business that can
working as an
employ others.
individual.

Entrepreneurs have
Self-employed
the potential to
individuals may
scale their
,

Self
Entrepreneurship
Employment

work on a businesses and

smaller scale. create larger
operations.

Self-
employment
Entrepreneurship
may be a way
often involves
for individuals
developing new
to earn income
ideas and creating
through their
innovative solutions.
skills or
expertise.

Self-employed
Entrepreneurs often
individuals may
have to manage a
have more
team and balance
control over
multiple
their work and
responsibilities.
schedule.

Self- Entrepreneurship
employment involves taking on
may involve greater financial risk
lower financial in order to grow and
risk. scale a business.
,

UNIT- II