MDC-03T: Entrepreneurship Development

Unit-I: Entrepreneurship development

i. Definition, role of small-scale industries in the national economy.
ii. Characteristics and types of small-scale industries; demand-based and resources- based
ancillaries.
iii. Government policy(s) for small scale industries; stages in starting a small-scale industry.

Unit-II: Project identification, planning and control

i. Assessment of viability, formulation, evaluation, financing.
ii. Field-study, preparation of project report, demand analysis, material balance and output
methods, benefit cost analysis.
iii. The financial functions, cost of capital approach in project planning and control
iv. Laws concerning entrepreneurship.
v. Role of various national and state agencies which render assistance to small scale industries.
Unit-III: Rural resource mobilization
i. Basic objectives
ii. Case study of eco-village, eco-tourism and agro-tourism.
iii. Micro financing with special reference to self-help groups.
iv. Rural entrepreneurship development through traditional technologies.

Unit-IV: Funding
i. Sources of Finance
ii. Venture capital- Venture capital process
iii. Business angles- Commercial banks
iv. Government Grants and Schemes.
Entrepreneurship development
 The concept of entrepreneurship has a wide range of meanings. On the one extreme an
entrepreneur is a person of very high aptitude who pioneers change, on the other
extreme of definitions, anyone who wants to work for himself or herself is considered
to be an entrepreneur.
CLASSIFICATION OF ENTREPRENEURSHIP

Hans Schollhammer (1980) has classified entrepreneurship into five categories such as
administrative, opportunistic, acquisitive, incubative and imitative entrepreneurship. But with
the change of time Entrepreneurship classification has increased. Entrepreneurship is classified
in Nine Types;

 Administrative Entrepreneurship- The entrepreneurial activity under this category is

centered around administrative techniques and functions. It gives a new option to
handle prevailing or future situations in a more effective way that provides advantages
and competitive edge.
 Opportunistic entrepreneurship- But everybody is not equally capable of identifying
and to utilize that opportunity on time. The entrepreneurship that identifies exploits and
executes the opportunity in the first hand regarded as opportunistic entrepreneurship.
 Acquisitive entrepreneurship- The entrepreneurship that learns from others
competencies is acquisitive entrepreneurship. It acquires something new of value front,
the competitive environment or achieves the competitors’ technical capacities.
 Incubative entrepreneurship- This category of entrepreneurship generates and
nurses’ new ideas and ventures within the organization. It executes them in a productive
manner and ensures material gain for the organization.
 Imitative entrepreneurship- The entrepreneurship that imitates a good or service
operating in the market under a franchise agreement is the imitative entrepreneurship.
It is the medium that spread technology over the world.
 Private Entrepreneurship- The entrepreneurship that is initiated under private sector
is private entrepreneurship. A layer and mutual relationship between private and public
sectors would make economic development speedy and balanced
 Public entrepreneurship- The entrepreneurship that is undertaken by the government
through its various development agencies is public entrepreneurship.
 Individual entrepreneurship- The entrepreneurship that is undertaken by an
individual or a family with the personal initiative is individual entrepreneurship.
 Mass Entrepreneurship- This type of entrepreneurship emerges in an economy where
a favorable climate of motivation and encouragement exist for developing a wide range
of entrepreneurship among general mass is mass entrepreneurship.’

ENTREPRENEUR

A person who is able to identify business opportunities and implement actions to maximize on
the opportunities. An entrepreneur initiates enterprise creation, undertakes risks, and manages
resources to establish and operate a business enterprise that is capable of self-sustenance.
Characteristics of Entrepreneur-

1. An eye for opportunity

2. Independence

3. An appetite for hard work

4. Self-confidence

5. Discipline

6. Judgment

7. Ability to accept change

8. Need to achieve

9. Focus on profits

10. Risk-bearing

11. Creative and Innovators

12. Leadership

Types of Entrepreneurs:

Classification on the basis of:

1. Types of Business: Business entrepreneur, trading entrepreneur, industrial entrepreneur,

corporate entrepreneur and agricultural entrepreneur.

2. Use of technology: technical entrepreneur, non-technical entrepreneur and professional

entrepreneur.

3. Motivation: pure entrepreneur, induced entrepreneur, motivated entrepreneur and

spontaneous entrepreneur.

4. Growth: growth entrepreneur and super growth entrepreneur.

5. Stages in development: First generation entrepreneur, modern entrepreneur and classical

entrepreneur.

6. Others: Area (rural and urban), gender (men and women), scale (micro, small and medium).

GENERAL KINDS OF ENTREPRENEURS

1. INNOVATIVE ENTREPRENEUR

The innovative entrepreneurs are high motivated and talented and is able to foresee potentially
profitable opportunities. They are those who may raise money to launch an enterprise, assemble
the various factors, select top executives and set the organizational operational. They are who
always search for change, responds to it and crab it as the opportunity. They identify the
opportunity for introducing a new technique or a new commodity or a new market with which
the consumers are not familiar or introduce creative change in already existing products. They
are quite aggressive in experimentation and putting attractive or viable possibilities into
practice. Thus, innovative entrepreneurs are one who believe in introducing new goods, adopt
new method of production, develop new market and restructure the organization under their
command. The innovative entrepreneur is need not be a inventor, he must have the ability to
transfer the inventors ideas into economic performance.

2. IMITATING ENTREPRENEURS

These entrepreneurs are those entrepreneurs who are unable to innovate the changes themselves
but they are capable enough to imitate the techniques and technology innovated by innovating
entrepreneurs. These types of entrepreneurs are always ready to adopt successful innovation
executed by innovating entrepreneurs. Developing economies and underdeveloped economies
need this type of entrepreneurs. These imitating entrepreneurs have the capacity to adjust the
new technologies with respect to their conditions.

3. FABIAN ENTREPRENEURS

Fabian entrepreneurs are neither having a will to introduce new change nor the desire to imitate
the new technology. They are always believing in tested routes of production and not interested
in taking risk. Actually, they are habitual of following the paths directed by earlier
entrepreneurs. Their dealing is guided by the customs, religion, tradition and past practices.
They avoid in taking challenges in production system and that is why they are unable to
maximize the fruits of entrepreneurial actions.

4. DRONE ENTREPRENEUR

Drone entrepreneurs always follow the traditional methods of production. These entrepreneurs
are those who are not inclined to bring changes in their production system as demanded by the
change in consumer preferences, technological innovation, economic and social behaviour of
the prospective customers. Market always provides opportunities to the entrepreneurs but this
type of entrepreneurs generally fails to use these opportunities in profitable way. Due to this
reason they fail to earn profit or even suffer loss.

5. SOCIAL ENTREPRENEUR

Social entrepreneurs are driven by social innovation and transformation in different fields
including education, health, poverty, environment etc. He identifies a problem in the society
and takes that as an opportunity and finds solution through his enterprise activity. His primary
objective is not profit; it is to solve a social problem. In other enterprises, the primary objective
is the profit, but for the social enterprise, profit is the secondary objective. The entrepreneurs
are also classified based on their business, motivation, growth, stages in development.
PROCESS OF ENTREPRENEURSHIP DEVELOPMENT

The below-mentioned steps will illustrate how to build an effective entrepreneurship

development program for an entrepreneur to organize and launch the new ventures.

 Discover – Any new process begins with fresh ideas and objectives, wherein the
entrepreneur recognizes and analyses business possibilities. The analysing of
opportunities is a risky task, and an entrepreneur looks out for inputs from other
persons, including channel partners, employees, technical people, consumers, etc. to
reach an ideal business opportunity.

 Evaluation – The evaluation of an opportunity can be done by asking several questions

to oneself. For instance, questions like whether it is worth taking a chance and investing
in the idea, will it attract the consumer, what are the competitive advantages and the
risk linked with it are asked. A reasonable and sensible entrepreneur will also analyse
his skills and whether it matches his entrepreneurial objectives or not.

 Developing a plan – After the identification of an opportunity, an entrepreneur has to

build a complete business plan. It is the most important step for new business as it sets
a standard and the assessment criteria and sees if a company is working towards the set
goals.

 Resources – The next step in the process of entrepreneurial development is resourcing.

Here, the entrepreneur recognizes the source of finance and from where the human
resource can be managed. In this step, the entrepreneur also tries to find investors for
his new business.

 Managing the company – After the hiring process and funds are raised now its time
to start the operation to accomplish the desired goals. All the entrepreneur will decide
on the management structure that will be assigned to resolve the operational problems
whenever it occurs.

 Harvesting – The last step in this process is harvesting, where an entrepreneur

determines the future growth and development of the business. Here, real-time
development is compared with the projected growth, and then the business security or
the extension is initiated accordingly.

BARRIERS IN ENTREPRENEURSHIP:

Following are the different types of barriers that come across the path of entrepreneurship:

 Financial barriers
 Personal barriers.
 Lack of motivation and encouragement
 Inability to depend on and trust others
  Lack of patience
 Lack of confidence
 Lack of vision
 Sense of embarrassment/pride
 Environmental barriers
 Machinery
 Raw material
 Land and building
 Infrastructure support
 Labour
 Political barriers

WOMEN ENTREPRENEUR

Entrepreneurship has traditionally been defined as the process of designing, launching and
running a new business, which typically begins as a small business, such as a startup company,
offering a product, process or service for sale or hire. It has been defined as the capacity and
willingness to develop, organize, and manage a business venture along with any of its risks in
order to make a profit.

Women entrepreneurship has been recognized as an important source of economic growth.

Women entrepreneurs create new jobs for themselves and others and also provide society with
different solutions to management, organization and business problems.

In India there are 5 types of women entrepreneurs

They are

1. Affluent entrepreneurs.

2. Pull Factors

3. Push Factors

4. Self Employed Entrepreneurs and

5. Rural Entrepreneurs

Affluent entrepreneurs

Affluent entrepreneurs are those women, hailing from rich business families and select their
trade in film distribution, beauty parlour, interior decoration, etc, and carry out their work with
the help of their family members.
Pull Factors- This type of entrepreneurs is educated women in cities take up entrepreneurship
as a challenge to do something new and to be economically independent. They usually take
low risk enterprises like establishing schools, catering centres, restaurants, grocery shops, etc.

Push Factors- These entrepreneurs are those who accepts entrepreneurial activities to
overcome family difficulties. The family situation forces them to start a new venture or to
develop the existing family business.

Self Employed- We know that women entrepreneurs are mostly undertake self-employment
ventures. This type of women is from very poor family and start mini enterprise like bamboo
making, broom making, candle making, tailoring firm or providing tea and coffee to schools
and offices are called self-employed entrepreneurs.

Rural Entrepreneurs- This type of entrepreneurs is hailing from rural areas and select less
risk trade like preparation of fruit juices, pickle making, pappad making, etc. Though women
have lots of business skills in them, there is no body to encourage and motivate them in
entrepreneurship. As a result, they have to face many problems even before starting their
enterprise and also while doing their business.

Challenges faced by women entrepreneurs

Conflicts between Work and Domestic Commitments- Women's family obligations also
bar them from becoming successful entrepreneurs in both developed and developing nations.
"Having primary responsibility for children, home and older dependent family members, few
women can devote all their time and energies to their business".

Gender gaps in education- While women are making major strides in educational
attainment at primary and secondary levels, they often lack the combination of education,
vocational and technical skills, and work experience needed to support the development of
highly productive businesses.

Lack of finance - Access to finance is one of the most common challenges that entrepreneurs
face and this is especially true for women who are further and the need for their husband's
countersignature on many documents.

Legal constraints in family law- The institutional and legal environment is critical to the
growth of female-owned enterprises. Laws regulating the private sphere specifically those
regarding marriage, inheritance and land can hinder women's access to assets that can be used
as collateral when securing a loan.

Heavy household responsibilities- Heavy household responsibilities leave a demand on

women especially those in rural areas who have more children. They are required to perform
their traditional role as housewives and therefore, they have fewer hours of free time than men,
both during the weekend and on weekdays.

An ILO report on women entrepreneurship identifies the following problems faced by

women entrepreneurs.

Lack of family support- Sometimes the family may make the women feel guilty of
neglecting household duties in her pursuit of business obligations. Cultural traditions may hold
back a woman from venturing into her own business.

Lack of capital-traditional sources of finance like banks are reluctant to lend to women
entrepreneurs especially if they do not have any male or family backing. This is especially true
of lower income females. Women do not have adequate finance or legal knowledge to start an
enterprise.

Lack of confidence and faith-lack of role models undermines the self-confidence of women
entrepreneurs. The activity of selling is considered abhorrent to the female gender.

Lack of right public/ private institutions- Most public and private incentives are misused
and do not reach the woman unless she is backed by a man. Also, many trade associations like
ministries, chambers of commerce do not cater to women expecting women’s organizations to
do the necessary thing.

If the women entrepreneurs overcome all these problems, it is sure that they all will shine as
successful entrepreneurs.

The Government of India has implemented various self-employment and wage

employment programmes for the development of women and children and are discussed
below:

Integrated Rural Development Programme (IRDP)

The Integrated Rural Development Programme (IRDP) was started in 1980 -1981 in all blocks
of the country and continued as a major self-employment scheme till March 31, 1999. IRDP
has several allied programmes aimed at the self-employment of the rural poor. Under this
programme poor borrowers are encouraged to organize themselves into groups, are or give
awareness training on importance of regular savings and credit discipline, and are instilled with
a sense of self-confidence.

Training of Rural Youth for Self-Employment (TRYSEM)

One of IRDP’s facilitating component is Training of Rural Youth for Self-Employment

(TRYSEM) introduced in 1979 was aimed at providing basic technical and entrepreneurial
skills to the rural poor in the age group of 18 – 35 years to take up income-generating activities.

Development of Women and Children in Rural Areas (DWCRA)

DWCRA was directed at improving the living conditions of women, and thereby of children
by offering opportunities for self-employment and access to basic social services. It sought to
encourage collective work in the form of group activities that were known to better work, and
were more sustainable than the individual effort.

Swarnajayanti Gram Swarozgar Yojana (SGSY)

SGSY was launched in April, 1999 and it is only self-employment programme currently being
implemented. It aims at promoting micro enterprise and to bring the assisted poor families
(Swarozgaris) above the poverty line by organizing them into self Help Groups (SHGs) through
the process of social mobilization, training and capacity building and provision of income
generating assets through a mix of bank credit and government subsidy.

Jawahar Rozgar Yojana (JRY)

This programme was announced on 28th April 1989. The JRY is specially targeted to help
people below the poverty line. Preference is to be given to SC/ST population and freed bonded
labourers. At least 30 percent of the employment is to be provided to women under the JRY.
Works undertaken under JRY included: social poverty, soil and water, conservation work,
minor irrigation work, construction of village tanks, construction of community sanitary
latrines; construction of houses for SC/ST population; construction of community centres and
construction of school buildings, etc.

National Rural Employment programme (NREP)

The National Rural Employment Programme was restricted and was introduced, in October
1980. The NREP aimed to create community assets for strengthening rural infrastructure,
which include drinking water wells, community irrigation wells, village tanks, minor irrigation
works, rural roads schools and balwadi buildings.

SMALL SCALE INDUSTRY

Small scale industries comprise of small enterprises that manufacture goods or provide services
with the help of smaller machines and a few workers and employees. The enterprise must fall
under the guidelines set by the Government of India.

Characteristics of Small-Scale Industries

1. Labor intensive:
Small-scale industries are fairly labour-intensive. They provide an economic solution by
creating employment opportunities in urban and rural areas at a relatively low cost of capital
investment.
2. Flexibility:
Small-scale industries are flexible in their operation. They adopt quickly to various factors that
play a large part in daily management. Their flexibility makes them best suited to constantly
changing environment.
3. One-man show:
A small-scale unit is generally a one-man show. It is mostly set up by individuals. Even some
small units are run by partnership firm or company, the activities are mainly carried out by one
of the partners or directors. Therefore,’ they provide an outlet for expression of the
entrepreneurial spirit. As they are their own boss, the decision-making process is fast and at
times more innovative.
4. Use of indigenous raw materials:
Small-scale industries use indigenous raw materials and promote intermediate and capital
goods. They contribute to faster balanced economic growth in a transitional economy through
decentralization and dispersal of industries in the local areas.
5. Local Area of operation:
Small-scale industries generally restrict their operation to local areas in order to meet the local
and regional demands of the people. They cannot enlarge their business activities due to limited
resources.
6. Lesser gestation period:
Gestation period is the period after which the return or investment starts. It is the time period
between setting the units and commencement production. Small-scale industries usually have
a lesser gestation period than large industries. This helps the entrepreneur to earn after a short
period of time. Capital will not be blocked for a longer period.
7. Educational level:
The educational level of the employees of small industries is normally low or moderate. Hardly
there is any need of specialized knowledge and skill to operate and manage the SSI.
8. Profit motive:
The owners of small industries are too much profit conscious. They always try to keep high
margins in their pricing. This is one of the reasons for which the unit may lead to closure

Role of SSI in Indian economy

1. Employment generation: The basic problem that is confronting the Indian economy is
increasing pressure of population on the land and the need to create massive employment
opportunities. This problem is solved to larger extent by small-scale industries because small-
scale industries are labour intensive in character. They generate huge number of employment
opportunities. Employment generation by this sector has shown a phenomenal growth. It is a
powerful tool of job creation.
2. Mobilization of resources and entrepreneurial skill: Small-scale industries can mobilize
a good amount of savings and entrepreneurial skill from rural and semi-urban areas remain
untouched from the clutches of large industries and put them into productive use by investing
in small-scale units. Small entrepreneurs also improve social welfare of a country by harnessing
dormant, previously overlooked talent. Thus, a huge number of latent resources; re being
mobilized by the small-scale sector for the development of the economy.
3. Equitable distribution of income: Small entrepreneurs stimulate a redistribution of wealth,
income and political power within societies in ways that are economically positive and without
being politically disruptive. Thus, small-scale industries ensure equitable distribution of
income and wealth in the Indian society which is largely characterized by more concentration
of income and wealth in the organized section keeping unorganized sector undeveloped. This
is mainly due to the fact that small industries are widespread as compared to large industries
and are having large employment potential.
4. Regional dispersal of industries: There has been massive concentration of industries m a
few large cities of different states of Indian union. People migrate from rural and semi urban
areas to these highly developed centres in search of employment and sometimes to earn a better
living which ultimately leads to many evil consequences of over-crowding, pollution, creation
of slums, etc. This problem of Indian economy is better solved by small- scale industries which
utilize local resources and brings about dispersion of industries in the various parts of the
country thus promotes balanced regional development.
5. Provides opportunities for development of technology: Small-scale industries have
tremendous capacity to generate or absorb innovations. They provide ample opportunities for
the development of technology and technology in return, creates an environment conducive to
the development of small units. The entrepreneurs of small units play a strategic role in
commercializing new inventions and products. It also facilitates the transfer of technology from
one to the other. As a result, the economy reaps the benefit of improved technology.
6. Indigenization: Small-scale industries make better use of indigenous organizational and
management capabilities by drawing on a pool of entrepreneurial talent that is limited in the
early stages of economic development. They provide productive outlets for the enterprising
independent people. They also provide a seed bed for entrepreneurial talent and a testing
ground for new ventures.
7. Promotes exports: Small-scale industries have registered a phenomenal growth in export
over the years. The value of exports of products of small-scale industries has increased to Rs.
393 corers in 1973-74 to Rs. 71, 244 corers in 2002-03. This contributes about 35% India’s
total export. Thus, they help in increasing the country’s foreign exchange reserves thereby
reduces the pressure on country’s balance of payment.
8. Supports the growth of large industries: The small-scale industries play an important role
in assisting bigger industries and projects so that the planned activity of development work is
timely attended. They support the growth of large industries by providing, components,
accessories and semi-finished goods required by them. In fact, small industries can breathe
vitality into the life of large industries.

The Start-up Process:

An entrepreneur desiring to set up an industry must at the outset become familiar with the
economic, political and legal environment in the country.
The main components of such environment are as under:
1. Priorities and policies of the Government
2. Assistance and facilities offered by various states.
3. Various organization assisting entrepreneurs.
4. Incentives for starting industry
5. Licensing and registration requirements
6. Policies and regulations concerning import and export, exercise and sales tax
After getting familiar, an entrepreneur should understand the procedure for setting up a small-
scale unit. The main steps involve in the establishment of a small business venture are as
follows:
1. Selection of product
2. Location of enterprise
3. Preparation of the project report
4. Choice of form of ownership
5. Registration with the authorities
6. Arranging term finance
7. Statutory license and clearance
8. Accruing land and building
9. Arranging working capital
10. Recruitment of staff
11. Installation of machinery
12. Procuring raw material
13. Power connection and water supply
14. Starting production
15. Marketing the product

Benefits of SSI Registration

Loans at low or concessional interest rates
SSIs can avail various tax rebates, after SSI registration
SSI units are granted carry forward of credit for Minimum Alternate Tax (MAT) for up to 15
years
Only SSIs are allowed to have access to certain government tenders
Acquiring government licenses and certifications becomes easier once a unit receives a
permanent registration
As many concessions and rebates are available, therefore the cost of setting up of industry
reduces
Project identification, planning and control
Project Management:
Project management is the planning, consistent monitoring and control of all aspects of the
project to achieve the organizational objective within a definite time span and to the specified
cost, quality and performance. Project Management is the art of managing all the aspects of a
project from start to finish using a scientific and structured methodology. project management
processes fall into five groups:

Initiating
Planning

Executing
Monitoring and Controlling
Closing
Tools and Techniques of Project Management: There are several techniques contributing
towards effective project management. These are grouped under the following heads:
I. Project Selection Techniques:
o Cost Benefit Analysis and
o Risk and Sensitivity Analysis
II. Project Execution Planning Techniques
o Work Breakdown Structure (WBS)
o Project Execution Plan (PEP)
o Project Responsibility Matrix
III. Project Scheduling and Co-ordinating Techniques
o Bar Chart
o Life Cycle Curves
o Line of Balance and
o Networking Techniques (PERT/CPM)
IV. Project Monitoring and Progressing Techniques
o Progress Measurement Technique (PROMPT)
o Performance Monitoring Techniques (PERMIT)
V. Project Cost and Productivity Control Techniques
o Productivity Budgeting Technique
o Value Engineering
VI. Project Communication and Clean-up Techniques
o Control Room
o Computerized Information System

Project Identification:

Project Identification is a process of generating a few ideas about the possible projects. The
project ideas can be discovered from various internal and external sources. It is apprehensive
with the collection, compilation and analysis of economic data for the eventual purpose of
locating probable opportunities for investment. Actually, Project identification means
identifying some possible projects having a good market.
Steps in Project Identification – For identifying the feasible projects, the prospective
entrepreneur has to go through the following steps.
Conceiving project ideas – This is the first vital stage in project identification. Profit making
is the chief drive behind every business or enterprise.
Choosing the right line of business – To ensure the success of the business, the potential
entrepreneur has to spend substantial time and energy on choosing the right line of activities.
Opportunity seeking – A number of business opportunity may be obtainable; however,
seeking the right business opportunity depends upon the entrepreneur’s capabilities, his
strengths and weaknesses and also on his preferences.
Decision-making process – This final step in project identification involves making important
decisions regarding the project to be undertaken. Project identification cannot be complete
without identifying the characteristics of the project.

Preparation of project report:

After the preparation of a business plan by evaluating a business idea, the next step is to garner
financial support. For bringing in financial support an entrepreneur requires to submit a detailed
project report which should cover the following basic aspect.
• Information about the promoters of the enterprise
• Information about the basic objective of the enterprise

• Information about the product and the processes involved

• Location of the enterprise

• Size of investments
• Estimated cost of the project and ability of financing thereof
• Technical arrangements
• Information about environmental concerns
• Profitability projections and cash flows

Management Evaluation
• Memorandum and Articles of Association: Object, authorized and paid-up share capital,
promoter’s contribution.

• Constitution and management of the industrial concern

• Present and proposed composition of the board of directors, borrowing powers, list of
directors on the Board, terms of appointment of directors, details of full time directors and their
responsibilities, details of Chief Executive and functional executives.

Technical Feasibility
1. Technology and manufacturing process: • novel technology to be used, • basis of selection
of technology, • competing technologies, • performance data of plants based on the technology,
• licensor documents.
2. Location of the Project: • advantages based on location, • availability of inputs viz., raw
material and other resources, • labour availability, • environmental clearances

3. Plant and Machinery: • list of machinery & equipment, • details of suppliers, competitive
quotations, technical & commercial evaluation of major equipment
4. Raw material, Utilities and Manpower 5. Project monitoring and implementations: • mode
of implementation, • details of monitoring team, • detailed schedule of implementation.
Environmental Aspects
Air, Water and Soil Pollution, list of pollutants/hazardous substances, their safety, handling and
affluent disposal arrangements, compliance with national and International Standards,
clearances and no objection certificates required and obtained etc.

Commercial Viability
• Proposed products existing and potential market demand and supply

• Proposed products share forecasted and analysed with respect to the market
• Manufacturing cost analysis

• Sale price of the proposed product

• Export potential analysis

Financial Feasibility
• Project Cost Analysis
• Operating cost and profits
• Operational performance and financial evaluation
• Financing modes
• Working Capital requirements

• Projections of Profitability (Projected income statement and balance sheets Cash flow
estimates)

PROJECT FEASIBILITY ANALYSIS

A Project feasibility analysis includes market analysis, technical analysis, financial analysis
and social profitability analysis. Although every feasibility analysis is different and tailored to
suit the product, its goal is to identify the existing strengths and weakness of the project.

The starting point of a project analysis is the establishment of objectives to be attained. The
next stage is the pre-selection stage- the advisability of having an in-depth study. The analysis
stage consists mainly of three factors-markets, technical and financial analysis. A market
analysis is a method of screening projects ideas as well as means of evaluating a project’s
feasibility in terms of the market. A market analysis should cover the following areas:

❖ A brief market description the market area, methods of transportation, existing rates of
transport, channels of distribution, and general trade practices.

❖ An analysis of past and present demand, determination of quantity value of consumption

and identification of the major consumers of the product.

❖ An analysis of past and present supply, broken down as source (whether imported of
domestic), as well as information to assist in determining the competitive position of the
product, such as selling prices, quality and marketing practices of competitors

The technical analysis for a project feasibility study established whether the project is
technically feasible or not, and whether it offers basis for the estimation of costs. Moreover, it
provides an opportunity for a consideration of the effect of various technical alternatives on
employment, ecology, infrastructure demands, capital service, support of other industries,
balance of payments and other factors. A technical analysis should review the techniques of
processes to be applied and should incorporate:
1) A description of the product, including specification relating to its physical, mechanical and
chemical properties, as well as the uses of the product.

2) A description of the selected manufacturing process, showing detailed flowcharts and

presenting alternative which may have been considered and the justification for the adoption
of the selected process.
3) A determination of the plant size and production schedule, which includes the expected
volume for a given time period on the basis of start-up and technical factors.
4) Selection of machinery and equipment, including specifications, equipment to be purchases
and its origin, quotations from suppliers, delivery dates, terms of payment, and a comparative
analysis of alternatives in term of cost, reliability performance and spare parts availability.

5) Identification of plant’s location and as assessment of its desirability in terms of its distance
from raw material source and markets. For a new project, this part may include a comparative
study of different sites, indicating the advantages and disadvantages of each.
6) A design of the plant layout and an estimate of the cost of the erection of the proposed
building and land improvements.
7) A study of the availability of raw materials and utilities including a description of physical
and chemical properties, quantities needed, current and prospective costs, terms of payment,
location and sources of supply, and continuity of supply.

8) An estimate of labour requirements including a detailed break-down of direct and indirect

labour requirements, and the supervision required for the product.
9) A determination of the type and quantity of waste to be disposed of, together with a
description of the waste disposal method, its costs, and the necessary clearance from proper
authorities.

10) An estimate of the production cost of the project.

In the financial analysis of this feasibility study, the emphasis is on the preparation of financial
statements, so that the project may be evaluated in terms of the different measure of commercial
profitability followed by the magnitude of financing which requires the assembly of the market
and also technical cost estimated in various Performa statements.

GENERATION OF PROJECT IDEA

Proper project idea generation and screening is the utmost importance. So due attention is
required while screening alternate projects, this lesson is devoted to the following aspects:
Corporate Appraisal- For the purpose of identification of investment opportunities a
reasonable appraisal of the strength and weakness of the company should be made. Following
are the broad areas in terms of a company’s strength and weaknesses:

 Marketing and distribution

 Production and Operation
 Research and development
 Corporate resources and personnel
 Finance and Accounting

Scouting for project ideas-

 Review Imports and Exports

 Study Plan Outlays and Government Policy for Industries
 Investigate Local Materials and Resource
 Analysis of Economic and Social trends
  Study New Technological Developments
Preliminary screening-
By using the suggestion made in the preceding section, it is possible to develop a long list of
project ideas. Some kind of preliminary screening is required to eliminate ideas, which prima
facie are not promising. For this purpose, the following aspects may be looked into:

 Compatibility with the promoter

 Consistency with governmental priorities.
 Availability of inputs
 Adequacy of market
 Reasonableness of cost
 Acceptability of risk level

Project Rating Index-

When a firm is evaluating a large number of project ideas regularly, it may be helpful to
streamline the process of preliminary screening. For this purpose, a preliminary evaluation may
be translated in to a project-rating index. The steps involved in determining the project-rating
index are as follows: -
1 Identify factors relevant for project rating.
2 Assigning weights to these factors (the weights are supposed to reflect their relative
importance).
3 Rate the project proposal on various factors, using a suitable rating scale.

4 For each factor multiply the factor rating with the factor weight to get the factor score.
5 Add all the factor score to get the overall project-rating index.

MARKET AND DEMAND ANALYSIS

The first step in project analysis is to estimate the potential, size of the market for the product
proposed to be manufactured (or service planned to be offered) get an idea about the marker
share that is likely to be captured. These are the following aspects of market and demand
analysis-

1. Situational analysis and specification of objectives of market and demand analysis

In order to get a “feel” for the relationship between the product and its market, the project
analyst may informally talk to customer, competitors, middleman, and others in the industry.
Wherever-possible, he may look at the experience of the company to the learn about the
performance and purchasing power of customers, actions, land strategies of competitors, and
practices of the middleman.

2. Collection of secondary information

In order to answer the questions listed while delineating the objectives of the market study,
information may be obtained from secondary and/ or primary sources. Secondary information
is information that has been gathered in some other context and is already available. Primary
information, on the other hand, represents information that is collected for the first time to meet
the specific purpose on hand. Secondary information provides the base and the starting point
for market and demand analysis. It indicates what is known and often provides leads and clues
for gathering primary information required for further analysis. This section looks at the
secondary information and the following at the information.

3. Conduct of market survey

Secondary information, though useful, often does not provide a comprehensive basis for market
and demand analysis. It must be supplemented with primary information gathered through a
market survey, specific to the project being appraised.
The market survey may be a census survey or a sample survey. In a census survey the entire
populations covered. Census surveys are employed principally or intermediate goods and
investment goods when such goods are used by a small number of firms. In other cases, a
census survey is prohibitively costly and may sample survey. In such a survey a sample of the
population is connected/ observed and relevant information is gathered. On the basis of such
information, inferences about the population may be drawn.
The information sought in a market survey may relate to one or more of the following:

❖ Total demand for the product and rate of growth of demand

❖ Demand in different segment of the market

❖ Motives for buying.

❖ Attitudes toward various products

❖ Socio-economic characteristics of buyers

❖ Income and price elasticity of demand

❖ Purchasing plans and intentions

❖ Satisfaction with existing products

❖ Unsatisfied needs

❖ Distributive trade practices

4. Features of the market

Based on the information gathered from secondary sources and through the market survey, the
market for the product/ service may be described in terms of the following:

❖ Effective demand in the past and present

❖ Breakdown of demand

❖ Price

❖ Methods of distribution and sales promotion

❖ Consumers

❖ Supply and compaction

❖ Government policy

To assertion the effective demand in the past and present, the starting point typically is apparent
consumption, which is defined as:
Production + Imports-Exports-changes in stock level

The figure of apparent consumption has to be an adjusted for consumption of the product by
the products are the effect of abnormal factors. The consumption series, after such adjustments,
may be obtained for several years.

PROJECT FORMULATION
Project formulation can be defined as the systematic. step-by-step development of a project
idea for the eventual objective of arriving at an investment decision. In fact, it is a careful and
scientific mechanism which enables the entrepreneur to achieve the project objective with the
minimum expenditure and adequate resources. This makes it an analytical management aid.
Project formulation helps not only in fighting with the internal problems of project idea but a
well-formulated project is the best way of getting financial assistance from various financial
Project formulation will also be of great assistance for obtaining necessary government
clearances and in meeting the hurdles of procedural formalities.
ELEMENTS OF PROJECT FORMULATION
Project formulation or the development of project has different stages. These are defined the
elements of the project formulation. Normally an entrepreneur goes through these sequential
stages:
1. Feasibility Analysis
2. Techno-Economic Analysis
3. Project Design and Network Analysis.
4. Input Analysis
5. Financial Analysis
6. Social Cost-Benefit Analysis
7. Pre-investment Appraisal
1. Feasibility Analysis: This is very first stage in project formulation. It is done by the
entrepreneur in order to evaluate the feasibility of the project. As it is examined in the context
of internal and external constraints, the entrepreneur may face three alternatives. First the
project idea seems to be feasible, second it is not feasible and third is a state of confusion with
inadequate data. Depending upon these alternatives, the entrepreneur moves ahead, as if it is
feasible-proceed to the second step. If not feasible-abandon the idea. And if sufficient data is
not available-making more efforts to collect the required data to come to a conclusion.
2. Techno-Economic Analysis: As the name indicates this analysis is concerned with the
technology selected and the economy of the project idea. In this step, estimation of project
demand potential and the choice of optimal technology is made. This analysis produces
necessary information on which the project design can be done appropriately. It also indicates
whether the economy is in a position to absorb the output of the project. As a project may
produce goods or provide services, it requires sufficient market survey for successful
completion of task. Market analysis is built-in step of this process. The size of the project and
technology used depend very much on the demand potential. Hence, the techno-economic
analysis may be described as the combination of two steps. The first is related with the
determination of the maximum feasible project output and the second is with the selection of
the optimal technology to get this output.
3. Project Design and Network-Analysis: Project design is one of the most important and
essential part of the project formulation. This defines individual activities and their inter-
relationship with each other which are being performed to constitute the whole project. This
identifies a detailed work plan including all events with time allocation and presented in a
network drawing. Network analysis is carried out to identify the optimal course of action, so
as to execute the project within the minimum time keeping in view the available resources.
This paves the way for detailed identification and quantification of the project inputs, an
essential step in the development of the financial and cost-benefit profile of the project. We
shall discuss it in detail further.
4. Input Analysis: Project is the combination of several activities required to convert an idea
into a reality. Each activity requires certain input to be complete successfully. Input analysis is
primarily concerned with the identification, quantification and evaluation of the inputs required
during the construction and also during the operation of the project. Inputs include all materials
as well as the human resources. Both recurring and non-recurring resources must be considered.
Input requirements constitute the basis of cost estimates of the project and are, therefore,
necessary for financial analysis or cost-benefit analysis of any project.
5. Financial Analysis: Finance may be considered as the life-blood of a project. Financial
aspects of an investment proposition have a significant impact on the acceptability or rejection
of a project. Financial analysis mainly involves estimating the project costs, estimation of the
operating cost of project and the fund requirements. This analysis provides the feasibility report
of any project to the entrepreneur to make decision about the project. It seeks to find out
whether the project will generate revenues to realise the ultimate objective for which it is being
designed. It reduces investment propositions to one common scale so as to permit comparison
and eventual investment decision.

Project financing
Finance is the life blood and nerve centre of a business irrespective of its size, kind or nature.
Just as circulation of blood is essential in the human body for maintaining life, finance is very
essential for smooth running of the business. On the basis of time, financial requirements of a
business can be divided into three parts:
Long-term requirements of funds
Medium-term requirements of funds and
Short-term requirements of funds.
Sources of Finance:
 Sources of Long-term Finance: Sources of long-term finance can be divided into two
parts: i) Owned Capital and ii) Borrowed Capital Owned Capital is provided by the
owners of business and includes ordinary shares, preference shares and reserves. On
the other hand, Borrowed Capital is raised as long-term loan from the borrowers. Main
sources of borrowed capital include debentures, bonds, lease financing and long-term
loans. In India, specialized financial institutions have been established for providing
long term loans.
 Sources of Medium-term Loans: Medium term loans can be made available from
various sources. Medium term sources include loans from financial institutions,
redeemable preference shares, redeemable debentures, public deposits, purchases under
Hire Purchase System and accumulated profits.
 Sources of Short-term Loans: Sources of short-term funds include bank loans, public
deposits, advances from customers, provision for taxes and credit purchases,
commercial papers etc.
Equity Shares: Equity shares have an important place in the capital structure of a company.
Ordinary share capital is the base debt and preference share capital. Ordinary shareholders are
the actual owners of the company and have full voting rights. They take part in the management
of the company through the appointment of directors. They have unlimited interest in the
incomes and assets of the company. The main objective of the company is to maximise the
value of shares held by shareholders.
Preference Shares: Preference share capital is another source of providing long term finance.
Preference shares are those shares which have preferential rights regarding the payment of
dividend and repayment of capital over the equity shareholders. Equity shareholders can’t be
paid any dividend unless dividend at a fixed rate is paid to preference shareholders.

Debentures: Debentures are an important source of long-term finance for a company. With the
help of this source, company arranges for finance for meeting the requirements of development
and modernization after its establishment. The funds acquired by issuing debentures are in the
form of loans and its holders are the creditors of company.
Loans from Financial Institutions: Generally, the companies raise a large portion of their
funds by issuing equity shares, preference shares and debentures for the achievement of their
objectives including project expansion, modernization, diversification etc. But due to increase
in the cost of projects, the industrial units have to depend on medium term and long-term loans.
In India, the financial institutions established at the national level include Industrial
Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI), Industrial
Credit and Investment Corporation of India (ICICI), Industrial Reconstruction Corporation of
India, (IRCI), Life Insurance Corporation of India (LIC), General Insurance Corporation (GIC),
Unit trust of India (UTI).

Public Deposits: Public deposits are an important source of medium term and short-term
finance of a company. In India, this is a traditional source of finance. After the third five-year
plan, there has been tremendous increase in the public deposits. In India, normally public
deposits are accepted for a period of 3 years. There are many reasons for attraction of
companies towards public deposits. The cost of these deposits is less than the rate of interest
offered by banks. There is no need to mortgage the assets for public deposits. Moreover, public
deposits are available for a longer period than bank loans. For investors also these deposits can
be quite useful because the rate of interest offered on these deposits is higher than the bank
rate.
Lease Financing: Initially, the concept of lease was limited to land only but for the past few
years, lease financing is becoming operational in the industrial arena. Lease is a long-term
source of business finance. Companies can take necessary business assets on lease rather than
buying them. If they purchase these fixed assets, they have to pay in full- Contrarily, under
lease agreement company gets the right to use the asset after making part payment for it. Under
this arrangement, the owner of the asset (lessor) surrenders the right to use the asset in favour
of other person (lessee) in consideration of pre-determined rent. After the lease period, whether
the asset will be returned to the lessor or it will be retained by the lessee, depends on the terms
of lease.

COST-BENEFIT ANALYSIS IN PROJECT MANAGEMENT

Cost of project
Conceptually, the cost of project represents the total of all items of outlay associated with a
project, which are supported by long-term funds. It is the sum of the outlays on the following:

❖ Land and site development

❖ Building and civil works.

❖ Plant and machinery

❖ Technical know-how and engineering fees

❖ Expenses on foreign technicians and treating of Indian technicians abroad

❖ Miscellaneous fixed assets

❖ Preliminary and capital issue expenses

❖ pre-operative expense

❖ Provision for contingencies

❖ Margin money for working capital

❖ Initial cash losses

Means of financing
Long term funds are required by a business to create production facilities through the purchase
of various fixed assets like plant, machinery, land, building etc. investment in the fixed assets
is required to be arranged from permanent or long-term sources of finance. We discuss below,
therefore, the long-term sources of finance used by a business enterprise. The major sources
long-term finance include:
1. Equity share Capital
2. Preference Share Capital
3. Retained Earnings
4. Debentures
5. Terms longs for Financial Institutions
6. Lease Financing
A cost-benefit analysis in project management is a tool to evaluate the costs vs. benefits of an
important project or business proposal. It is a practical, data-driven approach for guiding
organizations and managers in making solid investment decisions. It helps determine if a
project or investment is financially feasible and beneficial for the organization.
In a CBA, costs may include the following:
 Direct costs: These are costs that are directly related to the proposed project or
investment, e.g., materials, labour, and equipment.
 Indirect costs: These are related fixed costs that contribute to bringing the project or
investment to life, e.g., overhead, administrative, or training expenses.
 Opportunity costs: These are the benefits or opportunities foregone when a business
chooses one project or opportunity over others. To quantify opportunity costs, you must
weigh the potential benefits of the available alternatives.
 Future costs: These are costs that may come up later in the project. These costs depend
on certain factors happening, e.g., costs of mitigating potential risks.
Cost-benefit analysis facilitates a structured cost management process, helping project
managers and company executives prioritize projects and allocate resources effectively to
achieve the organization’s main goals.
Benefits may include:
 Tangible benefits: These are measurable outcomes that can be easily quantified in
monetary terms, e.g., increased revenue or reduced costs.
  Intangible benefits: These benefits are difficult to measure in monetary terms. They
are indirect or qualitative outcomes, such as improved customer satisfaction or
increased employee morale.

Steps in Conducting a CBA:

1. Define the Project Scope: Clearly define the project's objectives, deliverables, and
boundaries.
2. Identify Costs and Benefits: List all potential costs and benefits, including both direct
and indirect, financial and non-financial.
3. Assign Monetary Values: Quantify costs and benefits as monetary values whenever
possible.
4. Calculate NPV: Use the present value of all future cash flows to determine the project's
profitability.
5. Analyze Results: Compare costs and benefits, and analyze the NPV and benefit-cost
ratio to assess the project's financial viability.
6. Make Informed Decisions: Based on the CBA results, make informed decisions about
project continuation, modifications, or abandonment.
Cost of Capital
According to Mittal and Agarwal “the cost of capital is the minimum rate of return which
a company is expected to earn from a proposed project so as to make no reduction in the
earning per share to equity shareholders and its market price”.
According to Khan and Jain, cost of capital means “the minimum rate of return that a firm
must earn on its investment for the market value of the firm to remain unchanged”.
2. Significance of Cost of Capital:
1. Maximisation of the Value of the Firm:
For the purpose of maximisation of value of the firm, a firm tries to minimise the average cost
of capital. There should be judicious mix of debt and equity in the capital structure of a firm so
that the business does not to bear undue financial risk.
2. Capital Budgeting Decisions:
Proper estimate of cost of capital is important for a firm in taking capital budgeting decisions.
Generally, cost of capital is the discount rate used in evaluating the desirability of the
investment project. In the internal rate of return method, the project will be accepted if it has a
rate of return greater than the cost of capital. In calculating the net present value of the expected
future cash flows from the project, the cost of capital is used as the rate of discounting.
Therefore cost of capital acts as a standard for allocating the firm’s investible funds in the most
optimum manner. For this reason, cost of capital is also referred to as cut-off rate, target rate,
hurdle rate, minimum required rate of return etc.
3. Decisions Regarding Leasing:
Estimation of cost of capital is necessary in taking leasing decisions of business concern.
4. Management of Working Capital:
In management of working capital, the cost of capital may be used to calculate the cost of
carrying investment in receivables and to evaluate alternative policies regarding receivables. It
is also used in inventory management also.
5. Dividend Decisions:
Cost of capital is significant factor in taking dividend decisions. The dividend policy of a firm
should be formulated according to the nature of the firm— whether it is a growth firm, normal
firm or declining firm. However, the nature of the firm is determined by comparing the internal
rate of return (r) and the cost of capital (k) i.e., r > k, r = k, or r < k which indicate growth firm,
normal firm and decline firm, respectively.
6. Determination of Capital Structure:
Cost of capital influences the capital structure of a firm. In designing optimum capital structure
that is the proportion of debt and equity, due importance is given to the overall or weighted
average cost of capital of the firm. The objective of the firm should be to choose such a mix of
debt and equity so that the overall cost of capital is minimised.
7. Evaluation of Financial Performance:
The concept of cost of capital can be used to evaluate the financial performance of top
management. This can be done by comparing the actual profitability of the investment project
undertaken by the firm with the overall cost of capital.
Measurement of Cost of Capital:
Cost of capital is measured for different sources of capital structure of a firm. It includes cost
of debenture, cost of loan capital, cost of equity share capital, cost of preference share capital,
cost of retained earnings etc.

Laws concerning entrepreneurship

Startup in India is like the face of a new innovative idea under practical application and
expression of an idea that is implemented to be worked on. A startup is an entrepreneurial
business which is eager to catch the market pace and walk with matching the footsteps for other
business to exist in the market for a long time and secure a position. A startup can be in the
form of partnership, sole proprietorship, etc. Though a startup venture does not fall into proper
corporate culture in starting, it does have the legal responsibilities to be fulfilled while starting
and engaging in the business for growth and proper legal advancements. An entrepreneur faces
and tries to solve a lot of problems in business but he/she should not forget the eyes of laws on
all decisions.
 Labor and Employment Laws:
These laws govern the terms and conditions of employment, including wages, benefits, and
working hours. Key acts include the Minimum Wages Act, 1948, the Payment of Wages Act,
1936, and the Payment of Bonus Act, 1965.
 Business Registration and Compliance:
Entrepreneurs need to register their business under the appropriate legal structure, such as a
partnership or a limited liability partnership (LLP), and comply with relevant regulations.
 Intellectual Property:
Entrepreneurs need to protect their intellectual property, which includes trademarks, patents,
and copyrights. This can involve registering their intellectual property and taking steps to
prevent infringement.
 Contract Law:
Understanding contract law is essential for entrepreneurs as they enter into agreements with
suppliers, customers, and other businesses. Key aspects include contract formation, breach of
contract, and remedies.
 Taxation and Financial Compliance:
Entrepreneurs need to understand and comply with various tax laws, including income tax,
sales tax, and wealth tax. They also need to maintain proper financial records and ensure
compliance with accounting standards.
 Data Privacy and Security:
With the increasing importance of data privacy, entrepreneurs need to understand and comply
with privacy laws, including the Protection of Personal Information (Data Protection) Act,
2018.

 Competition Law:
This area of law aims to prevent anti-competitive practices and promote fair competition. The
Competition Commission of India (CCI) is the primary regulatory authority in India for
enforcing competition laws.
 Banking and Finance:
Entrepreneurs need to be aware of banking and finance laws, which govern lending, borrowing,
and financial transactions. These laws can affect how entrepreneurs secure financing for their
businesses.
 Health and Safety:
Entrepreneurs need to ensure that their businesses comply with health and safety regulations,
particularly in industries like manufacturing and construction. These regulations can help
protect employees and customers.
  Bankruptcy Law:
Entrepreneurs should be aware of bankruptcy laws, which govern the legal process of resolving
debts and restructuring businesses in financial difficulty

ROLE OF VARIOUS NATIONAL AND STATE AGENCIES WHICH RENDER

ASSISTANCE TO SMALL SCALE INDUSTRIES
The Indian government has been continuously supporting and enhancing small unit sectors in
multiple ways. India is focusing on rural industries and cottage sectors. In layman’s language,
a small business is a project or venture that needs a small budget or is directed by a small group
of people. Both the central and state government have been highlighting self-employment
opportunities in rural industries by offering assistance and support in financing in regards to
loans, training in regards to programs, raw materials, infrastructure and technology. The central
aim of the government assistance to small industries and small business units is to use the local
workforce and locally available resources that are later transformed into action by agencies,
provincial departments and corporations, etc.
Government Assistance to Small Industries
In order to support, promote and protect small businesses and help them become self-
supporting, numerous protective and promotional measures have been introduced by the Indian
government.
National Bank for Agriculture and Rural Development (NABARD): It was introduced by
the government in 1982 to offer action and promote the rural industries in the best possible
way. The plan has adopted multi-purpose strategies to promote rural business in India. It
supports small industries, rural industries and artisans, cottage industries and agriculture. Also,
it elevates training, counselling, along with development programmes for rural entrepreneurs.
A Rural Small Business Development Centre (RSBDC): It is a government centre sponsored
by NABARD for micro, small and medium businesses which are set up by world organizations.
The major aim of RSBDC is to work for financially and socially disadvantaged people and
groups. The plan does numerous programmes on skill upgradation, awareness,
entrepreneurship, training and counselling. Such programmes encourage several unemployed
youth and young women to learn various trades and introduce them to other good advantages
from it.
Direct Industries Centres (DICs): It was established in May 1978 to offer a ‘focal point’ for
the development of small industries. The primary objective to set up these centres was to evolve
modern small-scale units and offer institutional set up for traditional cottage sectors. The DICs
schemes were supposed to provide for all the services and support at pre-investment and post-
investment stages like assistance on raw materials, marketing, credit, training and a lot more.
These centres act as an intermediate party among the developmental blocs and well-specialized
institutions and small-scale enterprises.
National Small Industries Corporation (NSIC): It was established in 1995 by the
government to expand and support small businesses emphasizing on commercial factors. The
vital functions of NSIC are as follows:
  Supply imported goods and machines on the hire purchase agreement.
 Evolving small businesses by importing their items.
 Procurement of supply imported indigenous raw materials.
 Create awareness of technical upgradation.
Also, a new scheme known as performance and credit rating for small units has been introduced
by NSIC. It ensures that the more their credit rating, the more their financial assistance for their
investment and capital needs.
Small Industries Development Bank of India (SIDBI): It is a leading government bank to
offer direct and indirect financial assistance and support under multiple schemes to meet all the
credit needs of numerous small businesses.
The National Commission for Enterprises in the Unorganized Sector (NCEUS): NCEUS
was created in September 2004 by the government with the following goals:
 Strategies to boost the productivity of small industries in the informal sector.
 Forming links between small sector and finance, raw materials, infrastructure,
technology, etc.
 To build public and private partnerships for engagement in transmitting skills for the
informal sector.
 Offering microfinance for the informal sector.
 Offering social security for the informal sector.
 To introduce competition among small scale industries in a global environment.
Rural and Women Entrepreneurship Development (RWED): It is a government-based
organization that focuses on increasing the business environment for women and offering
support for women’s business approaches and initiatives. It also provides a manual for training
in entrepreneurship and renders advisory services.

Institutions Supporting Small Business Enterprises in India

Small Industries Development Bank of India (SIDBI)
A special act of the Parliament helped introduce this small-scale supporting enterprise to strive
in India. The main function of this body is to introduce new methods to upgrade and modernise
existing units.
Its functions are:
 To expand the ways of marketing the products made by small scale industries in
international and domestic markets.
 To promote employment in semi-urban areas to open up ways for higher employment
chances, and thus, keep a check on the migration of people from villages to towns.
Small Industries Service Institutes (SISI)
The Indian Government developed this institute in 1956 to educate and ensure that new and
useful services reach small scale industries. The Small Industries Service Industry gives
advisory and technical consultancy services to small scale industries in India.
They also provide various training facilities and management training courses. They help
demonstrate the use of modern technical processes on machines and newly introduced types of
equipment.
State Financial Corporations (SFC)
An act of the Parliament developed the State Financial Corporations in 1951 to provide small
and big loans to the small-scale industries and businesses and other industries. It also gives
financial assistance to small scale industries.
They provide various finance-based schemes such as the following:
 Financial schemes for technical companies
 Composite loan schemes
 Schemes for Physically Disabled People.
 Schemes for scheduled tribes and backward classes.
 Schemes for ex-Servicemen.
District Industry Centres {DIC}
Governments, both central and state, have taken several measures to promote the development
of small and village industries. Still, the results have fallen far short of expectations because
the attention for industrial development was primarily on large cities and state capitals. The
District Industry Centres provide a permanent verification to new growing entrepreneurs. They
offer technical advice to fresh entrepreneurs in the market. The DIC also registers units
permanently. The DIC takes the initiative to get clearances for projects from various
departments. They also assist the small scale-based industries in hiring or purchasing new types
of machinery based on loans, leases, etc.
Small Scale Industries Board (SSIB)
The Government of India sanctioned the Small-Scale Industries Board in 1954 to provide
advice on the programmes and policies related to the development of small-scale businesses
and industries. This body is also called the Central Small Industries Board {CSIB}. The main
purpose of this body was to make sure the artisan’s villagers working in small scale industries
get some bank credits along with the reduction of interest percentage in the loan.
Small Industries Development Organisation (SIDO)
The Small Industries Development Organisation (SIDO) is at the top of the leadership board
of small-scale industry-related organisations in charge of making rules, coordinating, and
observing small scale industry development. It has collaborated with the government, various
finance-based institutions, and other organisations that promote and help in the growth of
small-scale business units.