Small Business and Enterprises Class 11 Notes

The unit opens with the concept of the entrepreneurship development, and it has to be read with the definition of an entrepreneur, because the development is the process and the entrepreneur is the person whom it creates.

• An entrepreneur is a person who conceives of an idea of the business, who gathers the resources, that is the capital, the land, the material, the machinery and the people, who takes the risk of starting the enterprise, and who manages it and bears the profit and the loss of it, and therefore the entrepreneur is the organiser, the risk bearer and the innovator at the same time.
• Entrepreneurship is the willingness and the ability of a person to organise and to manage a business and to take the risk of it in the pursuit of the profit, and the three words that the definition carries are the innovation, the risk and the organisation, and the innovation is the new product or the new process or the new way of doing a thing.
• Entrepreneurship development, the ED, is the process of enhancing the entrepreneurial skills, the knowledge and the attitude of a person through a structured training, so that a person who has the raw ability is educated, his confidence is raised, and he is enabled to identify the opportunity and to launch the enterprise, and the result of the development is not a job but a job maker.
• The characteristics of an entrepreneur are the innovation, which is the ability to see a new product or a new way of doing, the risk taking, which is the willingness to commit the capital and the time where the outcome is uncertain, the persistence, which is the determination to try again after a failure, the vision, which is the long view of the growth of the enterprise, the skill of the organisation, which is the ability to bring the land, the capital, the material and the labour together, and the opportunity recognition, which is the eye for the demand that the market has not yet satisfied.
• The characteristics of the development itself are that it is a planned and a systematic process, that it is run through the training, the assistance and the finance, that it aims at the attitude, the skills and the knowledge together and not at any one of them alone, and that its result is measured by the number and the quality of the enterprises that it launches.
• The need for the entrepreneurship development is the creation of the employment, because the enterprises of the country absorb the workforce which the government alone cannot absorb, and it is the use of the local resources, and the development of the backward and the rural areas, and the earning of the foreign exchange through the exports, and the discouragement of the concentration of the wealth and the industries in the large cities, and the promotion of the self employment which raises the income and the standard of the rural household.
• The reason the chapter places the development before the business is that the developed person is the basis of everything that follows, so the concept, the characteristics and the need of the ED are the first things to be defined, and the Start-up India scheme in the later sections is one of the instruments by which the development is done.

The development of an enterprise is not a single act but a series of steps, and the syllabus separates the process into the identification of the opportunity, the testing, the development of the plan, the raising of the resources and the launch, and the growth.

• The first step is the identification of the opportunity, which is the search for the demand in the market that is not yet being served, and the sources of the idea are the observation of the wants of the consumer, the change in the technology, the success of the similar enterprise elsewhere, the skill of the person himself and the articles that are imported and that could be made at home.
• The second step is the testing of the idea, which is the investigation of whether the opportunity can be made into a business, and here the entrepreneur examines the size of the market, the price that the consumer will pay, the cost that he will bear, the competition that he will face and the laws that will apply to him.
• The third step is the development of the business plan, in which the entrepreneur puts the idea on paper, and the plan carries the product, the market and the customer of it, the capital that it needs, the place of the business, the number of the persons that it will employ and the return that it will give, and the plan is the document that the finance provider reads before he lends.
• The fourth step is the raising of the resources, in which the entrepreneur arranges the finance, the premises, the raw material, the machinery and the people, and the finance is raised in the ways that the next section lists, and the technology is either purchased or hired.
• The fifth step is the launch of the enterprise, in which the production begins and the goods reach the market, and the sixth step is the management and the growth, in which the entrepreneur watches the sale, the cost and the quality, and it is at this point that most of the small enterprises fail if the financing or the market has not been arranged well.
• The syllabus links this process to the Start-up India scheme, because the scheme exists to lower the barriers of the early steps, that is the registration, the financing and the compliance, and the process of the ED in the examination is therefore to be written as the opportunity, the plan, the resources and the launch, and then the scheme as the help that the government gives to the launch.

The Start-up India scheme is the government programme that the syllabus names, and the two questions on it are what the scheme gives to the start-up and from where the start-up can raise the money, and the answers are the list of the facilities and the list of the sources.

• The Start-up India scheme was launched by the Government of India in January 2016 to promote the new ventures, and a start-up under the scheme is a new enterprise that is working towards the innovation, the development or the improvement of a product, a process or a service and that has the potential of the employment and the growth, and the scheme gives the recognition of the entity as a start-up, and the recognition opens the tax concessions and the other facilities to it.
• The first facility of the scheme is the easier registration, because a start-up may register itself on the portal and receive the recognition on the basis of a self certification, instead of seeking a separate approval of the government for the various compliances, and the compliance itself is reduced.
• The second facility is the funding, and the scheme has set up the Fund of Funds for the start-ups, which is a fund that the government contributes to, that is managed through the Small Industries Development Bank of India and the other agencies, and that invests in the venture capital funds which in turn invest in the start-ups, so that the government does not select the individual start-up but supports the funds that do.
• The third facility is the tax benefit, under which the income of an eligible start-up is exempt from the tax on the profit for a period of the early years, and the other incentives of the capital gains are also given, and the fourth facility is the intellectual property, under which the cost of the filing of the patent of a start-up is supported through the facilitators of the scheme.
• The other facilities are the incubation, which is the space, the guidance and the mentoring that a start-up may receive from an incubator, the easier exit, so that a failed start-up can be closed quickly without the years of the winding up, and the building of the network of the entrepreneurs through the centres and the platforms.
• The ways in which a start-up is funded are the own savings of the entrepreneur, the money of the family and the friends, the loans of the banks under the self employment schemes such as the MUDRA loans, the venture capital, which is the equity of the professional investor who takes the risk of a high return, the angel investors, who are the wealthy and the experienced individuals who fund an early stage start-up in return for a share, the crowdfunding, which is the collection of the small sums from a large number of the people through a platform, the funds of the government, which include the Fund of Funds of the scheme, and the grants and the prizes of the accelerators.
• The difference among the ways is the stage, because the own savings and the family and the friends fund the earliest stage, the angel investors and the government fund the next stage, and the venture capital and the bank loans come in when the enterprise has shown the demand, and the confidence of the other investors rises as the stages pass.

The syllabus joins the intellectual property rights to the entrepreneurship, because the new product and the new idea are the most valuable asset that a start-up has, and without the law of the property the idea can be copied the day it is shown to the market.

• An intellectual property right is a legal right over the product of the intellect, that is over the invention, the design, the work, the mark and the name that a person or a firm has created, and it is called a property because it can be owned, sold and licensed, and the effect of the right is that the creator is the only person who is allowed to use his creation for the period of its validity.
• The patent is the right over an invention, over a new product or a new process, and it is granted for a period of twenty years, and it gives the inventor the exclusive right to make and to sell the invention, and it is the right that guards the technology of a start-up.
• The trademark is the right over a name, a logo, a symbol or a word by which the goods of a firm are distinguished from the goods of the others, and it is granted for a period of ten years and it can be renewed, and it protects the brand that the young firm builds, and it is the right that the consumer reads when he recognises the product.
• The copyright is the right over the literary and the artistic and the software works, over the book, the software code, the music and the film, and it is granted for the life of the author and a further period of sixty years, and it protects the expression of the idea and not the idea itself.
• The other forms of the intellectual property are the industrial design, which protects the shape and the appearance of a product, the geographical indication, which protects the name of a product that belongs to a place, such as the Darjeeling tea or the Kancheepuram silk, and the trade secret, which protects the formula and the process that the firm keeps to itself.
• The importance of the intellectual property to the entrepreneur is that it protects the innovation from the copying, so that the firm is not punished for being the first, that it gives the firm a competitive advantage over the producers who cannot use the invention, that it is an asset which can be sold and licensed and which raises the value of the firm in the eyes of the investor, and that it encourages the innovation itself, because the mind will not work on a new idea if the copyist can take it the same day that it is revealed.
• The link to the entrepreneurship development is therefore direct, that the entrepreneur who is trained to create and to risk must also be given the assurance that the creation is protected, and this is the reason the Start-up India scheme supports the cost of the patent and the reason the IPR is taught as a part of the entrepreneurship, and the two words that must not be confused are the patent on the invention and the copyright on the expression.

The second half of the unit turns from the person who creates the enterprise to the enterprise itself, and it begins with the definition, and the definition is that of the Micro, Small and Medium Enterprises Development Act of 2006, and the syllabus asks for the definition as the act draws it.

• The Micro, Small and Medium Enterprises Development Act, 2006, the MSMED Act, is the law of the country that defines the small and the medium enterprises, and its definition rests on the two tests, the investment in the plant and the machinery or the equipment, and the turnover of the enterprise, and the enterprise is classified into the micro, the small and the medium in the manufacturing and in the services.
• The limits of the definition were revised in 2020 and updated in 2021, and as the update stands, a micro enterprise is an enterprise whose investment is up to one crore rupees and whose turnover is up to five crores, a small enterprise is one whose investment is up to ten crores and whose turnover is up to fifty crores, and a medium enterprise is one whose investment is up to fifty crores and whose turnover is up to two hundred and fifty crores.
• The manufacturing enterprise is classified on the investment in the plant and the machinery, and the service enterprise is classified on the investment in the equipment, and the turnover is the value of the goods and the services sold in a year, and the two tests are applied both in the manufacturing and in the services.
• The words of the law that carry the marks are that the enterprise must satisfy both the tests together, that is the investment test and the turnover test, to be counted in a class, and it is this two fold test that the revised definition introduced, because the turnover prevents a large business from hiding in the small class by understating its investment in the machinery.
• The smaller of the two tests is the reason the act keeps the word development in its name, because the act does not only define the enterprise but also promotes it, by the reservation, the procurement, the delayed payment and the other benefits, and it is under this act that the small enterprise of the syllabus is examined with its role and its support.

The syllabus asks for the role of the small business in India with a special reference to the rural areas, and the role has to be written as a list of the contributions, and the name of the special reference is the villages and the backward regions.

• The first role of the small business is the employment, and it is the largest employer of the country, because it provides the work to the very large part of the workforce, and in the rural areas it is the work of the handloom, the handicrafts, the food processing and the repairs that keeps the household employed where the agriculture alone cannot.
• The second role is the generation of the employment in the small towns and the villages, which checks the migration of the people to the cities, and the artisan who can earn near his home does not move to the slum of a large city, so the small business distributes the population instead of concentrating it.
• The third role is the use of the local resources and the local skills, because the small industry uses the local raw material and the traditional skill, and this is the role that makes the rural business the keeper of the crafts and of the inheritance of the handloom and the embroidery.
• The fourth role is the support of the large industries, because the small enterprise supplies the parts, the components and the intermediate goods to the large factories as the ancillary supplier, and the large industry is served without the investment of the capital in the making of every part itself.
• The fifth role is the exports, because the handicrafts, the carpets, the garments and the agro processed goods which the small units produce earn the foreign exchange, and the small sector is one of the principal contributors to the merchandising exports of the country.
• The sixth role is the balanced and the regional development, because the incentive of the government places the industry in the backward regions, and the industry brings the roads, the power, the banks and the income to the region which the market would otherwise have left out.
• The seventh role is the support of the weaker sections, because the small enterprise is the enterprise of the woman, of the scheduled castes and the other backward classes and of the artisan, and the self employment that it gives is the only channel of the income for a large number of the households, and this is the role that the special reference to the rural areas is really about.
• The eighth role is the multiplier effect, because the income of the small rural enterprise is spent locally, and it raises the demand and the employment in the village, so the smallness of the individual unit is offset by the very large number of the units and of the persons that they touch.

The last part of the unit is the two agencies that the syllabus names, the National Small Industries Corporation and the District Industries Centre, and the special reference that goes with both of them is the rural and the backward areas, so the answer must show what each of them gives to a unit in a village.

• The National Small Industries Corporation, the NSIC, was established in the year 1955 to promote, to assist and to finance the small scale industries, and it performs the work of the single window of the assistance, so that a small unit may obtain from it much of what it would otherwise have to obtain from many offices.
• The NSIC supplies the machinery on the hire purchase, so that a small unit that cannot pay the full price of a machine may take it and pay in the instalments, and it supplies the raw material on the credit terms, and it provides the marketing assistance by the display and the procurement, and it provides the export assistance by the consortia of the small exporters.
• The NSIC also provides the technical assistance, that is the training, the testing, the tool room and the component of the manufacture, and it has set up the single point of the registration of the small enterprises, and this combination of the supply, the finance and the market is what the corporation does for the unit wherever it is, in the town or in the village.
• The District Industries Centre, the DIC, was set up from the year 1978 as a channel of the assistance at the level of the district, and its purpose was to bring the help of the government to the door of the small and the rural entrepreneur, because the entrepreneur of the backward region could not afford to travel to the state capital for every approval.
• The DIC identifies the potential of the district for the industry, that is the raw material, the skill and the demand of the region, it provides the guidance and the information to the new entrepreneur, it receives and forwards the applications for the registration, for the land, for the power and for the financing, and it sanctions the margin money and the subsidy for the eligible units, with a special attention to the rural and the backward areas and to the weaker sections.
• The difference between the two agencies is the level and the function, because the NSIC is a national corporation that supplies the raw material, the machinery and the market, and the DIC is the district office that guides the new entrepreneur, forwards his papers and sanctions the margin money, and a small unit commonly deals with both of them, the DIC for the starting and the NSIC for the running.
• The special reference to the rural and the backward areas runs through both, because the DIC was created expressly for the small and the rural entrepreneur and the NSIC reaches the rural unit through its networks and its programmes, and an answer on the schemes and the agencies must close with this sentence, that the support is directed at the units where the market does not reach.