MSME and Business Entrepreneurship

(i)

Systematic Activity: Entrepreneurship is a systematic, step-by-step, and purposeful activity. It has certain requirements that can be acquired, learnt, and developed through formal education and work experience.

(ii)

Lawful and Purposeful Activity: The objective of entrepreneurship is lawful business. The purpose of entrepreneurship is the creation of value for personal profit and social gain.

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Finance: MSMEs often face non-availability of adequate finance, heavily relying on local financial resources and sometimes falling victim to exploitation by money lenders.

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Raw materials: MSMEs encounter challenges in procuring raw materials, either compromising on quality or paying high prices due to their low bargaining power and inability to buy in bulk.

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Managerial skills: Many MSMEs are operated by a single person who might not possess all the necessary managerial skills, leading to inefficiencies in various functional activities.

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Balanced Regional Development: MSMEs contribute to the balanced regional development of India. They account for 95 per cent of the industrial units in the country, ensuring that industrialisation is not just limited to urban areas but is widespread.

2.

Employment Generation: After agriculture, MSMEs are the second largest employers of human resources in India. They generate a higher number of employment opportunities per unit of capital invested compared to large industries. This makes them more labour intensive and less capital intensive, which is particularly beneficial for a labour surplus country like India.

3.

Diverse Product Range: MSMEs supply a vast variety of products ranging from mass consumption goods like soaps, detergents, and domestic utensils to sophisticated items such as electro-medical equipment, electronic teaching aids, and engineering products. Traditional products like handlooms, handicrafts, and other village industry products also have significant export value.

4.

Promotion of Locally Available Resources: MSMEs produce simple products using simple technologies and depend on locally available resources, both material and labour. This means they can be set up anywhere in the country, leading to widespread benefits of industrialisation.

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Entrepreneurship Opportunities: MSMEs provide ample opportunities for entrepreneurship. They allow latent skills and talents of individuals to be channelled into business ideas with little capital investment and minimal formalities.

6.

Low Cost of Production: Due to their reliance on locally available resources and low overhead expenses, MSMEs enjoy a low cost of production. This low cost is a competitive strength for them.

7.

Quick Decision Making: The small size of these enterprises allows for quick and timely decisions without the need for extensive consultations, as seen in larger organisations. This agility enables them to capture new business opportunities at the right moment.

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Prevention of Rural Migration: One of the primary roles of MSMEs in rural India is the prevention of migration. By providing employment opportunities in rural areas, they deter the rural population from migrating to urban areas in search of jobs.

2.

Balanced Regional Development: MSMEs contribute to the balanced regional development of the country. They can be set up anywhere due to their reliance on simple products and technologies, and locally available resources. This ensures that the benefits of industrialisation are not just confined to urban areas but are widespread, leading to the balanced development of the country.

3.

Promotion of Local Resources and Skills: MSMEs in rural India often depend on locally available resources, both material and labour. This promotes the use of indigenous skills, grass root innovations, and local raw materials. For instance, sectors like handlooms, handicrafts, coir, sericulture, and khadi and village industries are major contributors to the growth of the MSME sector in rural areas.

4.

Opportunities for Entrepreneurship: MSMEs provide ample opportunities for entrepreneurship in rural areas. They allow individuals to channel their latent skills and talents into business ideas with minimal capital investment and formalities. This fosters a spirit of self-reliance and entrepreneurship in rural regions.

5.

Linkage with Other Sectors: MSMEs in rural India have a strong linkage with other sectors of the economy. They act as ancillary units and form an integral part of the value chain, ensuring a conducive environment for indigenous skills and entrepreneurship development.

6.

Contribution to Rural Industrialisation: The emphasis on MSMEs has always been an integral part of India’s industrial strategy. The promotion of MSMEs and rural industrialisation is seen by the Government of India as a powerful instrument for achieving accelerated industrial growth in rural and backward areas.

7.

Village and Cottage Industries: Village industries, defined as any industry located in a rural area producing goods or rendering services with or without power, play a significant role in rural India. Similarly, cottage industries, also known as rural or traditional industries, are not bound by capital investment criteria and are vital for the rural economy.

(i)

Finance: One of the most pressing issues for MSMEs is the non-availability of adequate finance. These businesses typically start with a small capital base and often lack the creditworthiness needed to secure capital from the markets. Consequently, they rely heavily on local financial resources and sometimes fall prey to exploitation by money lenders. Issues like delayed payments or capital being tied up in unsold stocks further exacerbate their financial woes. Moreover, banks are hesitant to lend money without sufficient collateral or guarantees, which many small businesses cannot provide.

(ii)

Raw materials: Procuring raw materials is another significant challenge for MSMEs. Due to their limited bargaining power, they often have to compromise on quality or pay a premium for good quality materials. They can’t afford to buy in bulk due to storage constraints. The general scarcity of essential raw materials like metals and chemicals in the economy affects the small scale sector the most, leading to wasted production capacity and potential shutdowns.

(iii)

Managerial skills: Small businesses are usually spearheaded by a single individual who might not possess all the necessary managerial skills. While they might have technical expertise, they often lack in areas like marketing. They also can’t afford to hire professional managers, leading to potential inefficiencies in business operations.

(iv)

Marketing: Marketing, a crucial revenue-generating activity, is often a weak point for small businesses. They lack a deep understanding of customer needs and requirements. Their dependence on middlemen sometimes results in exploitation through low prices and delayed payments. Direct marketing is also a challenge due to the absence of the required infrastructure.

(v)

Quality: Many MSMEs compromise on quality to cut costs and offer competitive prices. They lack the resources and expertise to invest in quality research and maintain industry standards. This inability to maintain quality becomes a significant disadvantage when competing in global markets.

(vi)

Capacity utilisation: Many small scale industries operate below their full capacity due to a lack of marketing skills or demand. This underutilisation increases their operating costs and can eventually lead to business closure.

(vii)

Global competition: In the era of globalisation, MSMEs face stiff competition not just from medium and large industries but also from multinational giants. These MNCs, with their vast resources and business volumes, pose a significant threat to the survival and growth of small scale industries.

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Clusters Development Program: The government promotes the establishment of industrial clusters which provide shared infrastructure and services to small businesses. This not only reduces the cost of production but also helps in marketing the products.

4.

Skill Development and Training: The government, through various schemes and initiatives, provides skill development and training to entrepreneurs. This helps in improving the quality of products and services, making them more marketable.

5.

Promotion through MSME Development Institutes: These institutes provide assistance in terms of technology upgradation, market research, and marketing strategies to small scale industries.

1.

Diverse Product Range: MSMEs produce a wide array of products, from simple consumer goods to high-precision, sophisticated finished products. This diversity in production is a testament to the innovative capabilities of MSMEs. They are not just limited to traditional goods but also venture into areas requiring high precision and sophistication.

2.

Contribution to Space Missions: A striking example of the innovative prowess of MSMEs is their contribution to India’s space missions. MSME Tool Rooms provided at least 10 components for Mangalyaan, India’s first inter-planetary space mission. They also played a significant role in Chandrayaan-2, India’s second moon mission, by developing vital components for the Cryogenic engine of the Launch Vehicle, Navigational assemblies of the Lunar Orbiter, and the wheel assemblies for the Moon Launch. This showcases that MSMEs are not just limited to small-scale businesses but have the capability to contribute to large-scale national projects.

3.

Adaptability and Value Creation: Entrepreneurship, which is closely linked with MSMEs, is inherently innovative. The characteristics of entrepreneurship, as mentioned in the passage, include systematic and purposeful activity, innovation in terms of cost-saving or revenue-enhancing measures, and organization of production. Entrepreneurs combine various factors of production in innovative ways to create value, showcasing their ability to introduce new products, discover new markets, and achieve technological breakthroughs.

4.

Addressing Global Competition: In the era of globalization, MSMEs face competition not only from domestic large industries but also from multinational giants. To stay competitive and relevant, innovation becomes a necessity for MSMEs. They need to constantly evolve, adapt, and come up with new solutions to address the challenges posed by global competitors.

5.

Meeting Local and Global Needs: Many global companies are increasingly looking at Indian MSMEs for strategic partnerships. This is because of the innovative capabilities of MSMEs in the niche of low-cost manufacturing and their ability to harness local skills and capabilities. Such partnerships are mutually beneficial and are a testament to the innovative strength of MSMEs.

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Diverse Product Offerings: MSMEs are known for producing a wide range of products, from simple consumer goods to high-precision, sophisticated finished products. This vast spectrum of products is a testament to the creativity and innovative capabilities inherent in MSMEs.

2.

Significant Contributions to Advanced Projects: The passage highlights the role of MSMEs in India’s space missions. MSME Tool Rooms contributed vital components for both Mangalyaan and Chandrayaan-2. Such contributions to technologically advanced projects underscore the innovative prowess of MSMEs, proving that they are not confined to traditional or small-scale endeavors.

3.

Entrepreneurship and Innovation: Entrepreneurship, which is closely associated with MSMEs, inherently values creativity and innovation. Entrepreneurs combine various factors of production in novel ways to create value. They introduce new products, tap into new markets, and achieve technological breakthroughs, as highlighted in the passage. This spirit of entrepreneurship, which thrives on creativity and innovation, is at the heart of MSMEs.

4.

Adapting to Global Competition: In today’s globalized world, MSMEs face stiff competition not just from domestic industries but also from multinational corporations. To remain relevant and competitive, MSMEs must constantly innovate. Their ability to offer unique solutions, products, or services gives them an edge in the market.

5.

Harnessing Local Skills for Global Needs: The passage mentions that global companies are increasingly seeking partnerships with Indian MSMEs. This is attributed to the innovative capabilities of MSMEs in low-cost manufacturing and their adeptness at leveraging local skills. Such collaborations highlight the global recognition of the creativity and innovation inherent in Indian MSMEs.

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(b)

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(d)

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Rajasthani Blue Pottery: Known for its unique blue dyeing and intricate hand-painted designs.

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Kota Doria Sarees: Lightweight sarees made in the Kota region, known for their unique square-like patterns called ‘khat.’

3.

Molela Clay Work: Traditional terracotta craft of the Molela region.

1.

Economic Growth: GI tags have boosted the sales of these products as they assure authenticity and quality. This has led to increased income for artisans and craftsmen.

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Preservation of Heritage: GI tags have helped in preserving the traditional crafts of Rajasthan, ensuring that the age-old techniques and skills are passed down through generations.

3.

Tourism Boost: Tourists are often attracted to regions known for their unique GI-tagged products. Rajasthan, with its array of GI-tagged crafts, has seen an influx of tourists interested in purchasing authentic Rajasthani crafts.

4.

Global Recognition: With the GI tag, Rajasthani products have gained recognition not just in India but also internationally. This has opened up global markets for these products, further boosting the state’s economy.