UNIT 3

Q1- EDP?
 Entrepreneurship development programme (edp) is a programme which helps in
developing the entrepreneurial abilities. The skills that are required to run a business
successfully is developed among the people through this programme.
 Sometimes, people may have skills, but it requires polishing and incubation. This
programme is perfect for them. This programme consists of a structured training
process to develop an individual as an entrepreneur.
 It helps the person to acquire skills and necessary capabilities to play the role of an
entrepreneur effectively. As per national institute of small industry extension training,
Hyderabad, an edp is an effort of converting a person to an entrepreneur by passing him
through a thoroughly structured training.
 An entrepreneur is required to respond appropriately to the market, and he/she is also
required to understand the business needs. The skills needed are varied and they need
to be taken care in the best possible way.
 Edp is not just a training programme but it is a complete process to make the possible
transformation of an individual into an entrepreneur. This programme also guides the
individuals on how to start the business and effective ways to sustain it successfully.

Objectives of edp

 Short-term objectives: these objectives can be achieved immediately.in the short-

term, the individuals are trained to be an entrepreneur and made competent enough
to scan existing market situation and environment. The person, who would be the
future entrepreneur, should first set the goal as an entrepreneur. The information
related to the existing rules and regulations is essential at this stage.
 Long-term objectives: the ultimate objective is that the trained individuals
successfully establish their own business and they should be equipped with all the
required skills to run their business smoothly.

The overall objectives of edp are mainly to help in rapid industrialisation by supplying
skilled entrepreneurs. At the same time, it also industrialises underdeveloped areas. The
performance of small and medium scale industries is expected to improve by this and
therefore providing a huge scope of employment generation in these sectors. This
programme primarily aims at providing self-employment to the young generation.

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Q2- TRAINING AND ITS OBJECTIVES
 Training constitutes a basic concept in human resource development. It is concerned
with developing a skill to a desired standard by instruction and practice.
 Training is a highly useful tool that can bring an employee into a position where they can
do their job correctly, effectively, and conscientiously.
 Training is the act of increasing the knowledge and skill of an employee for doing a job.
 Training is an investment that businesses make in their workforce. Like any
investment, it must have a payoff if it is to be considered worthwhile.
 An immediate objective of training is to give employees the skills they need to become
better workers, resulting in financial gain. Other objectives include creating a
supportive workplace, so employees know they are valued and feel more satisfaction
in their jobs.

Objectives-

1). Increase efficiencies in processes

The main purpose of training is to ensure that all employees have the technical skills
needed to perform the job efficiently and smoothly. While technical training can be job-
specific, programs typically focus on the hard skills an employee needs to meet the key
performance indicators associated with the role. Employees who are competent and up to
date with industry best practices are more productive and have fewer accidents. These
factors help to position your business as a strong competitor within your market.

2). Increase motivation and engagement

Giving people the knowledge, education and tools to work better, win promotions and
fulfil their career potential shows employees they are valued. Employees who feel
appreciated tend to feel motivated in their work and are more satisfied with their jobs.
Naturally, this creates loyalty, engagement and enthusiasm among staff – attributes that
boost performance and benefit the organization.

3). Reduce employee turnover

An important aspect of training is to give context to a worker's role, so he understands how
his daily efforts support the wider company mission. Workers who are stuck in job-related
silos tend to feel disenfranchised about their jobs; this has long been associated with
increased rates of absenteeism and turnover. Studies suggest that it costs anywhere from
16-to-66 percent of an employee's salary to replace someone who quits. So, there are
considerable cost savings to be made from helping an employee feel like a relevant and
valued part of the organization, so she is far less likely to leave.

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4). Upskill employees
Training presents an opportunity to expand the knowledge base of employees – addressing
weaknesses, upskilling them to do new and different tasks and allowing them to work
independently without supervision. Upskilling not only keeps employees fresh, independent
and motivated, it also enhances the company's profile. A good company is seen as one that
develops and retains staff rather than churns, so having a strong and consistent training
policy makes a company more attractive to hires. Leadership and management training
programs are especially appealing both for graduates and mid-career employees since they
show that a company is committed to promoting staff from within.

5). Risk management

Certain types of training are specifically designed to minimize the risk to workers and the
organization in terms of accidents, safety code violations, lawsuits and customer
complaints. Diversity training, training about sexual harassment, workplace safety training,
customer service training and other quality initiatives can all help businesses to develop
their services and competitiveness while minimizing any hazards along the way.

Q3- HOW EDP IS CONSIDERED AS TRAINING PROGRAM?

“entrepreneurship has been considered the backbone of economic development, it has
been well established that the level of economic growth of a region to a large extent,
depends on the level of entrepreneurial activities in the state.

The myth that entrepreneurs are born, no more holds good, rather, it is well recognized
now that the entrepreneurs can be created and nurtured through appropriate interventions
in the form of entrepreneurship development programs in the state.”

These programs are sponsor by central and state government departments. These
entrepreneurship development programs (edp) of 4 to 6 weeks duration, aim at training the
target group in the essentials of conceiving, planning, initiating and venture upon an
economic activity or an enterprise successfully.

The program content includes class room training on providing them inputs on behavioural
science like achievement motivation training, risk taking behaviour, goal setting,
transactional analysis, decision making process, creativity, effective communication skills,
identification of business opportunities, and role and function as well as different schemes
assistance offered by the support agencies, preparation of project profile, project report,
interaction with existing entrepreneur, market potential survey, inputs on management of
an enterprise, marketing aspects, technical & finical aspects of an enterprises etc. Factory/
field visits are also arranged for the participants
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Q4 - BENEFITS OF ENTREPRENEURSHIP DEVELOPMENT PROGRAM:
One can easily derive the benefits of edp from the program’s roles that have already been
highlighted. In summary, some of the key benefits of edp include;

1. Business guidance
Participants in this program receive important entrepreneurship guides that are very critical
in running a successful business. The guides act as your “mentors” or “consultants” when it
comes to personal development, sales, marketing, finance, and strategy. Edp can enable
you to take your enterprise to the next level through insightful and interactive guides.

2. Access to funding
in order to grow a business, you need finances and accessing funds can be a serious
challenge for most entrepreneurs. The program can give you access
to financial institutions that can provide you with funds to grow your business. However, it
is important to point out that the program does not provide funds but gives you access to
its network financing partners.

3. Access to infrastructure
it is sometimes very expensive to get an ideal business infrastructure on your own and this
program can come in handy and help you access the necessary infrastructure. The program
helps you access hot-desking facilities, it and front-desk infrastructure, boardrooms, and
business premises. The first step towards becoming a successful entrepreneur is by having
access to the right business infrastructure.

4. Access to specialists
any business will at some point need the services of professionals in order to remain
sustainable or move to the next level. Through its support system, the program can help
you access experts that are cost- effective. The experts can be of great help when it comes
to critical areas such as legal aid, human resources, financial advice, taxation, and
marketing.

5. Access to markets
most entrepreneurs will agree that a business can only be sustainable when you have no
access to markets. Growing entrepreneurial businesses can largely benefit from edp
through its viable market channels. Being part of the program allows you direct access to
thousands of alumni businesses, other businesses on current programs, and large corporate
supply chains.

Q5- HOW MDI IMPARTS TRAINING PROGRAMME?

Ifci had sponsored in 1973, the management development institute (mdi) at Gurgaon near
Delhi in Haryana for developing and improving the quality of day-to-day management of
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any industrial venture. It also encourages professionalization in the management of the
enterprises. It stands devoted to evolving model syllabi for training various target groups by
effective training strategies, methodology, manuals and tools, facilitating and supporting
central/state governments and other agencies in executing programmes of
entrepreneurship and small business development.
How this program will help participants make a difference to organisational success

• preparing the company for the dynamic and changing landscape

• identifying new opportunities by early spotting of trends and emerging developments

• helping in setting the strategic direction for the organisation

• managing customers as valuable assets through customer attraction, customer retention

and

Loyalty building

• helping to take new cross-functional initiatives by taking the customer-rest approach

• to build a strong reputation for the company and its brands

• using customer feedback to tune up organizational processes

• helping organisation to build superior customer value of its products and services across
all

• facilitate building an innovation-oriented organization culture

Participants will experience a range of inputs that would provide deeper understanding of
issues concerning marketing, sales, market development, customer engagement,

Strategies in different target markets or target groups as well as enhance critical

approaches and skills to effectively implement marketing strategies.

The program would enable participants:

• enhance their understanding of the potential role of marketing strategy in their

organizations

• gain greater awareness of how to link marketing with business strategies to achieve
competitive advantage

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• understand and explore the current as well as evolving needs of different target markets
and target groups

• get acquainted with global marketing practices in a cross-cultural context; practices that
would increase market growth options for their organizations to get acquainted

With the formulation and implementation of innovative strategies to exploit growth

options in global market.

Q5- ROLE OF NIESBUD

Niesbud is an apex organisation working under the administrative control of the ministry of
skill development and entrepreneurship, government of India.

The major activities of the institute include training of trainers, management development
programmes, entrepreneurship-cum-skill development programmes, entrepreneurship
development programmes and cluster intervention. The core objectives of the institute
are as follows:

 To standardize and systemize the processes of selection, training, support and

sustenance of potential and existing entrepreneurs.

 To support and motivate institutions/organizations in carrying out training and other

entrepreneurship development related activities.

 To serve as an apex national level resource institute for accelerating as well as

enhancing the process of entrepreneurship development, to measure the impact of the
same within different strata of the society.

 To provide vital information and support to trainers, promoters and entrepreneurs by

organizing research and documentation activities relevant to entrepreneurship and skill
development.

 To create a holistic environment to train the trainers, promoters and consultants in

diverse areas of entrepreneurship and skill development.

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 To offer consultancy nationally/internationally for promotion of entrepreneurship and
small business development at national and international level.

 To provide national/international forums for interaction and exchange of ideas for

policy formulation and its refinement at various levels.

 To share experience and expertise in entrepreneurship development across national

frontiers to create awareness on it at national level.

 To interchange international experience and expertise in the field of entrepreneurship

development for mapping its development at international levels too.

Q7- OBJECTIVES OF STEP’S

Science & technology entrepreneurship park (step)
 The science parks and similar initiatives help in creating an atmosphere for innovation
and entrepreneurship; for active interaction between academic institutions and
industries for sharing ideas, knowledge, experience and facilities for the development of
new technologies and their rapid transfer to the end user.
 The science & technology entrepreneurs park (step) programme was initiated to provide
a re-orientation in the approach to innovation and entrepreneurship involving
education, training, research, finance, management and the government.
 A step creates the necessary climate for innovation, information exchange, sharing of
experience and facilities and opening new avenues for students, teachers, researchers
and industrial managers to grow in a trans-disciplinary culture, each understanding and
depending on the other's inputs for starting a successful economic venture.
 Steps are hardware intensive with emphasis on common facilities, services and relevant
equipment’s. The major objectives of step are to forge linkages among academic and
r&d institutions on one hand and the industry on the other and promote innovative
enterprise
Objectives
 To forge a close linkage between universities, academic and r&d institutions on one
hand and industry on the other.
 To promote entrepreneurship among science and technology persons, many of
whom were otherwise seeking jobs soon after their graduation.
 To provide r&d support to the small-scale industry mostly through interaction with
research institutions.
 To promote innovation-based enterprises.

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Facilities and services provided by steps
 It offers facilities such as nursery sheds, testing and calibration facilities, precision
tool room/central workshop, prototype development, business facilitation,
computing, data bank, library and documentation, communication, seminar
hall/conference room, common facilities such as phone, telex, fax, photocopying. It
offers services like testing and calibration, consultancy.
 Training, technical support services, business facilitation services, database and
documentation services, quality assurance services and common utility services.

Q8 – NAYE?
National alliance of young entrepreneurs (naye). This is a national organization of young
entrepreneurs of the country, which- investigates the interests of young entrepreneurs
takes special care of the interests of women entrepreneurs.
Some of the major achievements of naye are:
 Establishing its credibility in both governmental and non-governmental circles as a highly
professional, competent, effective and efficient non-governmental organization
representing small and medium enterprises.
 Establishing its effective presence in the area of international cooperation in small and
medium enterprise sector.
 Creating a profound impact of various strategies, policies and procedures put on the
anvil by the central and state governments for performance of small and medium
enterprise.
 Creating and nurturing a new class of women entrepreneurs and enabling them to
acquire their rightful place in the Indian economy.
 All the above measures are applicable equally to women enterprises as majority of them
fall in the small enterprise’s category. There are many entrepreneurs not only in training
them to be entrepreneurs but also in specific areas for financial identification of units
and for marketing.

Q9- EDI
 The entrepreneurship development institute of India (edi), an autonomous body and
not-for-profit institution, set up in 1983, is sponsored by apex financial institutions,
namely the idbi bank ltd, ifci ltd. Icici ltd and state bank of India (sib).
 The edi has been selected as a member of the economic and social commission for Asia
and the pacific (escap) network of centres of excellence for hrd research and training.
 Edi’s mission is to become a catalyst in facilitating emergence of competent first-
generation entrepreneurs and transition of existing smes into growth-oriented

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 enterprises through entrepreneurship education, training, research & institution
building.
 Edi has been spearheading entrepreneurship movement throughout the nation with a
belief that entrepreneurs need not necessarily be born but can be developed through
well-conceived and well-directed activities.
In consonance with this belief, edi aims at:
-creating a multiplier effect on opportunities for self-employment,
- augmenting the supply of competent entrepreneurs through training,
- augmenting the supply of entrepreneur trainer-motivators,
- participating in institution building efforts,
- inculcating the spirit of 'entrepreneurship' in youth,
- promoting micro enterprises at rural level,
- developing and disseminating new knowledge and insights in entrepreneurial theory and
practice through research,
- facilitating corporate excellence through creating intrapreneurs (entrepreneurial
managers),
- improving managerial capabilities of small-scale industries,
- sensitizing the support system to facilitate potential and existing entrepreneurs establish
and manage their enterprises,
- collaborating with similar organisations in India and other developing countries to
accomplish the above objectives.

Q10- SIDBI ROLE IN EDP

 The sidbi (small industries development bank of India) is a wholly owned subsidiary Of
idbi (industrial development bank of india), established under the special act of thE
Parliament 1988 which became operative from April 2, 1990.
 Sidbi was made responsible for administering small industries development fund and
National equity fund that were administered by idbi before. Sidbi is the primary
financial Institution for promoting, developing and financing msme (micro, small and
medium Enterprise) sector.
 Besides focussing on the development of the micro, small and medium enterprise
sector, Sidbi also promotes cleaner production and energy efficiency. Sidbi helps msmes
in Acquiring the funds, they require to grow, market, develop and commercialize them
Technologies and innovative products. The bank provides several schemes and offers
Financial services and products for meeting the individual’s requirement of various
Businesses.
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Functions of sidbi (small industries development bank of India)
1. Small industries development bank of India refinances loans that are extended by the
plies
To the small-scale industrial units and offers resources assistance to them
2. It discounts and rediscounts bills
3. It also helps in expanding marketing channels for the products of ssi (small scale
Industries) sector both in the domestic as well as international markets
4. It offers services like factoring, leasing etc. To the industrial concerns in the small-scale
Sector
5. It promotes employment- oriented industries particularly in semi-urban areas for
creating
Employment opportunities and thus checking relocation of people to the urban areas
6. It also initiates steps for modernisation and technological up-gradation of current units
7. It also enables the timely flow of credit for working capital as well as term loans to small
Scale industries in cooperation with commercial banks
8. It also co-promotes state level venture funds

Q11-ROLE OF CORPORATE BANKS

Retail banking and corporate banking are essential components of the banking system and
commercial banks. The existence of both is imperative for the functioning of the economies
at the domestic and global level. Their primary role in the growth and development is
through the facilitation of business. Meanwhile, banks are instrumental in the
government’s monetary support and plan.
1. Capital formation:
The banks are a basic source of creating capital that is significant for the working
And development of an economy. No economy can survive without an adequate
Degree of capital. Banks use the deposits, savings, and investments of them
Customers to create capital and remove the deficiency. They make optimum usage
Of the accumulated savings of the people within the branches and make it available
For enterprise and developmental work.

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2. Financial services:
Corporate banks are a primary source of finances for entrepreneurial and industrial
Work. As mentioned above, they provide a wide range of financial services to
Businesses. Therefore, it is important for domestic and international trade and
Commerce. Besides foreign trade transactions, handling of deferred payments and
Enabling import of heavy machinery is also taken care of by corporate banks. Also,
They facilitate business between domestic and foreign companies.
3. Providing credit:
Banks are fundamental sources of credit necessary for establishing and developing
industries. Where would you get large sums of money needed for setting up big
corporations?

4. Directing funds for development work:

Banks invest the savings of the people for a more productive purpose like developmental
work. They mobilize the money and distribute it to various sectors of the economy,
contributing to the growth of the country. They are one of the main sources of economic
development and capital formation.

5. Financial support to government:

Government is the prime governing body responsible for the development of various
industries and sectors. However, it requires financial support in order to carry out
developmental work in different regions of the economy. Banks provide long-term credit to
the government through government securities and treasury bills.

6.promotion of entrepreneurship:
Banks are a backbone of the promotion and development of entrepreneurship in countries
like India. From generating project ideas and providing managerial guidance to the
provision of funds, everything is a part of the entrepreneurial role of the banks. Whether
its corporate banking or commercial banking, banks are the major source of money supply
in an economy.
Hence, they play an important role in stabilizing the economy and the financial situation in
the country. They have a major part in development planning by sponsoring, initiating and
implementing special programs especially for the agricultural sector and small-scale
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industries. Apart from these, the bank provides risk management services, remittance
services, foreign exchange and more. They are also instrumental in creating awareness in
rural areas. At the same time, they are involved in monetary policy formation. The bottom
line is that retail and corporate banking are both important for effective functioning,
growth, and development of the economy.
Q12- ROLE OF B SCHOOL IN ED?
 ‘entrepreneurship is the professional application of knowledge, skills and competencies
or of monetizing a new idea, by an individual or a set of people by launching an
enterprise
 The b-schools are the most appropriate nursery of shaping and developing management
graduates for entrepreneurship who possess integrity and ethical standards. The
economic liberalization in early 90’s
 A business school is a university-level institution that confers degrees in business
administration or management.
 Business schools can aid students in the process of understanding and appreciating the
contexts in which they will operate.  business schools often help to refine and enhance
an individual’s understanding of his or her own leadership potential.  they have the
potential to develop not only winning personal qualities but also provide an opportunity
to create employment for self and for others.
 Business schools alone certainly cannot prevent an economic crisis, but they are
uniquely positioned to help the leaders of tomorrow prepare to manage risk and adhere
to ethical business practices, both of which are essential safeguarding the global
economy.
 B-schools have a significant role to play in the growth of India as a nation because they
are the breeding grounds for future entrepreneurs.  they have a definite role in
enhancing entrepreneurship by enlarging the pool of entrepreneurs in society. 
therefore, the Indian government should take appropriate measures to promote and
develop entrepreneurial education in India

Example- pannier sama was 25 when he founded the pioneering venture together with his
bits pilani batchmates charan padmaraju. In June 2013, they sold redubs to the Ibibio group
for an estimated Rs 600-700 crore.  redubs now sells over a million tickets a month, and
the gross value of transactions on the site last year was about Rs 600 crore

Example of b-school: xlri is India’s leading private, business management school based in
Jamshedpur, Jharkhand, India. Established in 1949 as the Xavier labour relations institute,
xlri is acknowledged as India’s oldest business management school.

UNIT 4

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Q13- STEPS FOR STARTING A SMALL ENTERPRISE

Here are 10 steps that are required to start a business successfully. Take one step at a time,
and you'll be on your way to successful small business ownership.

Step 1: do your research

 Most likely you have already identified a business idea, so now it's time to balance it
with a little reality. Does your idea have the potential to succeed? You will need to run
your business idea through a validation process before you go any further.
 For a small business to be successful, it must solve a problem, fulfil a need or offer
something the market wants.
 There are several ways you can identify this need, including research, focus groups, and
even trial and error. As you explore the market, some of the questions you should
answer include:

 Is there a need for your anticipated products/services?

 Who needs it?
 Are there other companies offering similar products/services now?
 What is the competition like?
 How will your business fit into the market?

Step 2: plan

 You need a plan in order to make your business idea a reality. A business plan is a
blueprint that will guide your business from the start-up phase through establishment
and eventually business growth, and it is a must-have for all new businesses.
 The good news is that there are different types of business plans for different types of
businesses.
 If you intend to seek financial support from an investor or financial institution, a
traditional business plan is a must. This type of business plan is generally long and
thorough and has a common set of sections that investors and banks look for when they
are validating your idea.
 If you don't anticipate seeking financial support, a simple one-page business plan can
give you clarity about what you hope to achieve and how you plan to do it. In fact, you
can even create a working business plan on the back of a napkin and improve it over
time. Plan in writing is always better than nothing.

Step 3: plan your finances

Starting a small business doesn't have to require a lot of money, but it will involve some
initial investment as well as the ability to cover ongoing expenses before you are turning a
profit.

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Put together a spreadsheet that estimates the one-time start-up costs for your business
(licenses and permits, equipment, legal fees, insurance, branding, market research,
inventory, trademarking, grand opening events, property leases, etc.), as well as what you
anticipate you will need to keep your business running for at least 12 months (rent, utilities,
marketing and advertising, production, supplies, travel expenses, employee salaries, your
own salary, etc.).

Those numbers combined is the initial investment you will need. Now that you have a
rough number in mind, there are several ways you can fund your small business, including:

 Financing
 Small business loans
 Small business grants
 Angel investors
 Crowdfunding.


Step 4: choose a business structure

 Your small business can be a sole proprietorship, a partnership, a limited liability

company (llc) or a corporation. The business entity you choose will impact many factors
from your business name, to your liability, to how you file your taxes.
 You may choose an initial business structure, and then revaluate and change your
structure as your business grows and needs change.
 Depending on the complexity of your business, it may be worth investing in a
consultation from an attorney or cpa to ensure you are making the right structure choice
for your business.

Step 5: pick and register your business name

 Your business name plays a role in almost every aspect of your business, so you want it
to be a good one. Make sure you think through all the potential implications as you
explore your options and choose your business name.
 Once you have chosen a name for your business, you will need to check if it's
trademarked or currently in use. Then, you will need to register it. A sole proprietor
must register their business name with either their state or county clerk. Corporations,
llcs, or limited partnerships typically register their business name when the formation
paperwork is filed.
 Don't forget to register your domain name once you have selected your business name.
Try these options if your ideal domain name is taken.

Step 6: get licenses and permits

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Paperwork is a part of the process when you start your own business. There are a variety of
small business licenses and permits that may apply to your situation, depending on the type
of business you are starting and where you are located. You will need to research what
licenses and permits apply to your business during the start-up process.

Step 7: choose your accounting system

 Small businesses run most effectively when there are systems in place. One of the most
important systems for a small business is an accounting system.
 Your accounting system is necessary in order to create and manage your budget, set
your rates and prices, conduct business with others, and file your taxes. You can set up
your accounting system yourself or hire an accountant to take away some of the
guesswork. If you decide to get started on your own, make sure you consider these
questions that are vital when choosing accounting software.

Step 8: set up your business location

 Setting up your place of business is important for the operation of your business,
whether you will have a home office, a shared or private office space, or a retail
location.
 You will need to think about your location, equipment, and overall setup, and make sure
your business location works for the type of business you will be doing. You will also
need to consider if it makes more sense to buy or lease your commercial space.

Step 9: get your team ready

 If you will be hiring employees, now is the time to start the process. Make sure you take
the time to outline the positions you need to fill, and the job responsibilities that are
part of each position. The small business administration has an excellent guide to hiring
your first employee that is useful for new small business owners.
 If you are not hiring employees, but instead outsourcing work to independent
contractors, now is the time to work with an attorney to get your independent
contractor agreement in place and start your search.
 Lastly, if you are a true solopreneur hitting the small business road alone, you may not
need employees or contractors, but you will still need your own support team. This team
can be comprised of a mentor, small business coach, or even your family, and serves as
your go-to resource for advice, motivation and reassurance when the road gets bumpy.

Step 10: promote your small business

 Once your business is up and running, you need to start attracting clients and
customers. You'll want to start with the basics by writing a unique selling proposition
(usp) and creating a marketing plan. Then, explore as many small business marketing
ideas as possible so you can decide how to promote your business most effectively.

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 Once you have completed these business start-up activities, you will have all the most
important bases covered. Keep in mind that success doesn't happen overnight. But use
the plan you've created to consistently work on your business, and you will increase
your chances of success.

Q14- PROBLEMS OF SMALL ENTERPRISE

Small scale industries do not enjoy much of the advantages enjoyed by large scale
enterprises because of their nature and size. Though they have made significant
contribution to economic development, they have not realized their full potential. They
face many problems in their functioning and many small-scale industries are sick.

The following are the problems faced by small scale industries:

1. Poor capacity utilization

In many of the small-scale industries, the capacity utilization is not even 50% of the
installed capacity. Nearly half of the machinery remains idle. Capital is unnecessarily locked
up and idle machinery also occupies space and needs to be serviced resulting in increased
costs.

2. Incompetent management

Many small-scale industries are run in an incompetent manner by poorly qualified

entrepreneurs without much skill or experience. Very little thought has gone into matters
such as demand, production level and techniques, financial availability, plant location,
prospects etc. According to one official study, the major reason for ssi sickness is deficiency
in project management i.e., inexperience of promoters in the basic processes of production,
cash flow etc

3. Inadequate finance

Many small-scale industries face the problem of scarcity of funds. They are not able to
access the domestic capital market to raise resources. They are also not able to tap foreign
markets by issuing adr’s (American depository receipts) gdr’s (global depository receipts)
etc because of their small capital base. Banks and financial institutions require various
procedures and formalities to be completed. Even after a long delay, the funds allocated
are inadequate.

Bank credit to the small-scale sector as a percentage of total credit has been declining. It
fell from 16% in 1999 to 12.5% in 2002. Small scale industries are not able to get funds
immediately for their needs. They must depend on private money lenders who charge high

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interest. Finance both long and short term, accounts for as large as 43% of the sector’s
sickness.

4. Raw material shortages

Raw materials are not available at the required quantity and quality. Since demand for raw
materials is more than the supply, the prices of raw materials are quite high which pushes
up the cost. Scarcity of raw materials results in idle capacity, low production, inability to
meet demand and loss of customers.

5. Lack of marketing support

 Small scale industries lack market knowledge about competitors, consumer preferences,
market trends. Since their production volume is small and cannot meet demand for
large quantities their market is very restricted.
 Now with the process of liberalization and globalization they are facing competition
from local industries as well as foreign competitors who sell better quality products at
lower prices.
 For e.g. Heavily subsidized but better-quality imports from china has made most of the
Indian ssi units producing toys, electronic goods, machine tools, chemicals, locks and
paper etc., unviable.

6. Problem of working capital

Many small-scale industries face the problem of inadequate working capital. Due to lack of
market knowledge their production exceeds demand, and capital gets locked in unsold
stock. They do not have enough funds to meet operational expenses and run the business.

7. Problems in export

They lack knowledge about the export procedures, demand patterns, product preferences,
international currency rates and foreign buyer behaviour. Small scale industries are not
able to penetrate foreign markets because of their poor quality and lack of cost
competitiveness. In countries like Taiwan, japan etc. Products produced by small scale
industries are exported to many foreign countries. But in India not much thought and focus
has gone into improving the export competitiveness of small-scale industries.

8. Lack of technology up-gradation

Many small-scale industries still use primitive, outdated technology leading to poor quality
and low productivity. They do not have adequate funds, skills or resources to engage in
research and development to develop new technologies. Acquiring technology from other

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firms is costly. Therefore, small scale industries are left with no choice but to continue with
their old techniques.

9. Multiplicity of labour laws

One of the merits of small-scale industries are that they are labour intensive and can
provide employment to many people. But the multiplicity of labour laws, need to maintain
several records (pf, esi, muster rolls etc), fines and penalties for minor violations etc place
small scale industries at a great disadvantage.

10. Inability to meet environmental standards

The government lays down strict environmental standards and courts have ordered closure
of polluting industries. Small scale industries which are already facing shortage of funds to
carry out their business are not able to spend huge sums on erecting chimneys, setting up
effluent treatment plants etc.

11. Delayed payments

Small scale industries buy raw materials on cash but due to the intense competition must
sell their products on credit. Buying on cash and selling on credit itself places a great strain
on finances. The greater problem is payments are delayed, sometimes even by 6 months to
one year. It is not only the private sector but even government departments are equally
guilty. Delayed payments severely impact the survival of many small-scale industries.

Q15- HOW TO CLASSIFY AND EVALUATE A PROJECT

Project - A project is a combination of human and non-human resources put together in a

temporary organization to achieve a specified purpose. Project is a system involving co-
coordination of several interrelated activities to achieve a specific objective.

Project cycle project cycle has five stages – identification, formulation, appraisal,
implementation and monitoring and evaluation.

(i) Identification: identification could be from several sources: progressive farmers,

entrepreneurs, technical experts, local leaders, bankers, mass media, extension
agencies and national policies and plans.

(ii) Formulation: preparation of feasibility study is the first step in analysis. Advanced
techniques of project planning like programme evaluation and review techniques
(pert) and critical path method (cpm) are used in capital intensive and complex

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 project and those with longer gestation period (the period between starting of
implementation of the project and income generation).

(iii) Appraisal: after preparation, every project is appraised by an independent agency.

This includes analysis and scrutiny of each, and every aspect, details and assumptions
made in the project. Generally, banks must undertake the appraisal of project before
financing. The appraisal is also assigned to specialized agencies in case of complex
project. The appraisal is conducted from several aspects like technical, financial,
commercial, managerial, economic, distributive and environmental. Even within
financial appraisal, there are various types of analysis.

(iv) Implementation: implementation basically means translating the proposal into a

ground level project. The phases of the implementation are:

A) predevelopment phase: this involves getting registration, licenses and

loan disbursement,

b) development phase: construction of structures and starting up of

production, and

C) operational phase: starts with production and concludes when the

economic life of the project comes to an end.

(v) monitoring and evaluation: the final phase in project cycle is the monitoring and
evaluation. Monitoring keeps track of the project, usually done by collecting certain
performance indicators about

Evaluation - the project to check whether the project is performing according to the plan,
identifying problem areas and finding possible solutions. There are two types of monitoring
which banks undertake: a) desk monitoring based on collected data and b) field monitoring,
based on actual field visit. Evaluation is conducted for the purpose of learning lessons of
success and failure from the project. There are several organizations (like nabard or training
establishments) which conduct such evaluation studies and publish them for wider
circulation.

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