Self-Employment: Importance and Scope of Small Business in India, Government Policy Towards Small Business (For CBSE, ICSE, IAS, NET, NRA 2022)

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Importance of Small Business in India

Small business enterprises are found everywhere. They play a major role in the socio-economic development of any country. In view of India՚s scarce capital resource and abundant labour and natural resources, small-scale enterprises have been given an important place in the economic planning of the country. In India small-scale enterprises account for 35 % of the gross value of the output in the manufacturing sector, 0 % of the total industrial employment and about 45 % of the total exports. Besides these contributions, the importance of small-scale business is increasing day by day due to the following factors.

Type: Importance of Small Business in India

Scope for Small Business

The scope for small business is vast covering a wide variety of activities starting from retailing to manufacturing. There are some specific areas of economic activity which can be effectively and successfully managed by forming small business enterprises. Let us discuss about the scope for small business.

  • Trading which involves buying and selling of goods and services requires less capital and time to start. This area of economic activity is dominated by small-scale entrepreneurs.
  • The activities which require personalised service like motor repairing, tailoring, carpentry, beauty parlour etc. are run by establishing small business.
  • It is the best option for those who do not like to be an employee but become self-employed. People can work independently by running a small enterprise of their own.
  • For products and services, which are of less demand or their demand is limited to any specific area, the small-scale business is most suitable for them.
  • A large industrial unit cannot run smoothly without the support of small units. These industrial units often depend upon the small units (ancillary industrial undertaking) to get some parts or spares, which cannot be profitably produced by them.
  • In the era of business process outsourcing (BPO) , many new areas have opened up for small business enterprises.
  • The business enterprises, which require constant touch of the owners with customers as well as the employees, can only be successfully run in the form of small enterprises.

Government Policy Towards Small Business

The Government of India has given special importance to small business enterprises due their vast potentiality for development of social and economic condition of the country. Several assistance and support are announced from time to time keeping in view the changing economic conditions. The following are some of such steps taken by the Government for development of small business in India.

  • It provides liberalised credit policy like, less formalities to process the loans and advances, loans at concessional rate, etc.) for small scale industries.
  • To keep away from the competition with large scale industries, the Government of India has reserved about 800 items for exclusive production by small scale industries.
  • It provides concession and exemption in excise and sales tax to the small-scale units. The excise exemption has raised from ₹ 50 lakhs to ₹ One crore for small industries.
  • The Government also gives preference to the products of small enterprises while purchasing stationery and other item for its own consumption and use.
  • For promotion, financing and development of small-scale industrial enterprises several institutes like Small Industrial Development Bank of India (SIDBI) , National bank for Agriculture and Rural Development (NABARD) , District Industries Centres (DICs) etc. have been set up by the Government.
  • The Government of India has set up separate Ministry of Micro, Small and Medium Enterprises (msme. gov. in) for effective planning and monitoring of the development of small business enterprises in the country.
  • To provide benefits of its plans and policies to large number of industries, it has lowered the investment limit from ₹ 3 crores to ₹ One crore.
  • The Government provides capital subsidy of 12 % for investment in technology in select sectors of small-scale business.
  • To encourage total quality management (TQM) the Government provides grant of ₹ 75,000 to each unit that obtains ISO 9000 certification.
  • To provide finance, design and marketing support to handloom sector it has launched the Dindayal Hathkargha Protsahan Yojana.
  • The Government of India has permitted up to 24 % of total shareholding of small-scale units by other industrial units.
  • The Government provides land, power and water etc. at concessional rates to small business enterprises.
  • Special incentives are also provided for setting up of small enterprises in rural and backward areas.
  • The Government encourages to establish small-scale industry by providing developed land and industrial estates.

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