MSME and Business Entrepreneurship

This page contains the NCERT Business Studies class 11 chapter 9 MSME and Business Entrepreneurship from Part 2 Corporate Organisation, Finance and Trade. You can find the solutions for the chapter 9 of NCERT class 11 Business Studies, for the Short Answer Questions, Long Answer Questions and Projects/Assignments Questions in this page. So is the case if you are looking for NCERT class 11 Business Studies related topic MSME and Business Entrepreneurship question and answers.
Very Short Answer Questions
1. Which year the MSMED Act passed?
The MSMED Act was passed in the year 2006.
2. What is the micro enterprise?
A micro enterprise is a type of business unit where the investment in plant and machinery does not exceed 1 Crore and its turnover does not exceed 5 crore.
3. What is a cottage industry?
Cottage industries are also known as rural industries or traditional industries. They are not defined by capital investment criteria as in the case of other small scale industries.
4. What is meant by Village and Khadi Industry?
Village industry has been defined as any industry located in a rural area which produces any goods, renders any service with or without the use of power and in which the fixed capital investment per head or artisan or worker is specified by the central government, from time to time. The Khadi and Village Industries segment is a major contributor to the growth of the MSME and involves the production of goods using traditional methods and local resources.
5. Give any two characteristics of entrepreneurship development.
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.
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.
Short Answer Questions
1. What is MSME?
MSME stands for Micro, Small and Medium Enterprises. They play a crucial role in India’s economic growth, contributing significantly to GDP, exports, and employment. MSMEs are vital for the country’s industrialization, using local raw materials and indigenous skills. In India, they encompass both ‘traditional’ and ‘modern’ small industries, producing a wide range of products.
2. State the meaning of entrepreneurship?
Entrepreneurship is the process of setting up one’s own business, distinct from other economic activities like employment or practicing a profession. The individual who sets up the business is termed an entrepreneur, and the output or the business unit is called an enterprise. Entrepreneurship is crucial for the overall economic development of a nation.
3. MSME and Entrepreneurship are connected. Do you agree. Give two reasons.**
Yes, I agree that MSME and Entrepreneurship are connected.
Firstly, entrepreneurship provides self-employment to the entrepreneur and plays a vital role in creating and expanding opportunities for other economic activities, which often fall under the MSME sector.
Secondly, in the context of India, with shrinking employment opportunities in the public sector and vast opportunities arising from globalization, entrepreneurship can drive the growth of MSMEs, taking India closer to becoming a significant economic power.
4. State the role of MSME in the development of a country?
MSMEs play a crucial role in the economic development of a country. They contribute significantly to employment generation, industrial production, and exports. Furthermore, MSMEs foster entrepreneurship and innovation, which are essential for the overall economic growth and diversification of a nation’s industrial base.
5. What are the different parameters used to measure the size of MSME?
The size of MSMEs is typically measured based on two parameters:
investment in plant and machinery for manufacturing enterprises and
investment in equipment for service enterprises.
These investments help in categorizing businesses into micro, small, or medium enterprises.
6. State the meaning of Village and Khadi industries?
Village and Khadi industries refer to industries that are located in rural areas and primarily use traditional methods and crafts to produce goods. Khadi specifically pertains to hand-spun and hand-woven cloth, often made from cotton. These industries play a vital role in providing employment opportunities in rural areas and preserving traditional crafts and skills.
7. State any three major problems faced by MSMEs?
Three major problems faced by MSMEs are:
Finance: MSMEs often face non-availability of adequate finance, heavily relying on local financial resources and sometimes falling victim to exploitation by money lenders.
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.
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.
Long Answer Questions
1. How do small scale industries contribute to the socio-economic development of india? Discuss
Micro, Small and Medium Enterprises (MSME) hold a pivotal position in the socio-economic development of India. Their significance can be understood through the following points:
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.
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.
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.
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.
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.
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.
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.
In conclusion, MSMEs play a crucial role in the socio-economic growth of India by promoting balanced regional development, generating employment, producing a diverse range of products, and fostering entrepreneurship. Their ability to operate at a low cost and make swift decisions further cements their importance in the Indian industrial scenario.
2. Describe the role of small business in rural India.
Small businesses, particularly Micro, Small and Medium Enterprises (MSMEs), play a pivotal role in the socio-economic landscape of rural India. Their influence in rural regions can be described as follows:
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.
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.
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.
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.
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.
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.
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.
In conclusion, small businesses, especially MSMEs, are the backbone of rural India. They not only provide employment and prevent migration but also promote local resources, skills, and entrepreneurship. Their role in fostering balanced regional development and rural industrialisation is paramount to the socio-economic development of the country.
3. Discuss the problems faced by small scale industries.
Small scale industries, particularly the MSMEs (Micro, Small, and Medium Enterprises), face a multitude of challenges that hinder their growth and potential. These problems are often a result of their size and the nature of their operations. Here are the major problems faced by small scale industries:
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.
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.
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.
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.
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.
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.
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.
In conclusion, while small scale industries play a crucial role in the economy, they grapple with numerous challenges ranging from financial constraints to global competition. Addressing these issues is essential for their sustainability and growth.
4. What measures has the government taken to solve the problem of finance and marketing in the small scale sector?
The Indian government has recognized the significance of the small scale sector in the country’s economic development and has implemented various measures to address the issues of finance and marketing faced by this sector:
Financial Initiatives:
Micro Units Development & Refinance Agency Ltd. (MUDRA): Launched under the Pradhan Mantri MUDRA Yojana, it provides financial assistance to micro and small enterprises. Loans under MUDRA are given under three categories: Shishu, Kishor, and Tarun, catering to different stages of business requirements.
Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE): This scheme provides collateral-free loans to micro and small enterprises. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) provides a guarantee to the lender granting the loan.
Priority Sector Lending: Commercial banks are mandated to provide a certain portion of their lending to the priority sectors, which includes the small scale industries.
Marketing Assistance:
Government e-Marketplace (GeM): An online platform where small scale industries can register and sell their products directly to government departments and public sector units.
Public Procurement Policy: The government has mandated that a certain percentage of its total purchases of goods and services should be from micro and small enterprises. This ensures a ready market for products and services of the small scale sector.
Trade Fairs and Exhibitions: The government, through various bodies, organizes national and international trade fairs and exhibitions. These events provide a platform for small scale industries to showcase their products and services, helping them to expand their market reach.
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.
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.
Promotion through MSME Development Institutes: These institutes provide assistance in terms of technology upgradation, market research, and marketing strategies to small scale industries.
In conclusion, the government has taken a holistic approach to address the challenges of finance and marketing faced by the small scale sector in India. Through a combination of financial initiatives, marketing support, skill development, and infrastructure development, the government aims to bolster the growth and competitiveness of small scale industries.
5. ‘Innovation is integral to MSME’. Discuss giving reasons to your answer.
Innovation is undeniably integral to Micro, Small and Medium Enterprises (MSME). The given passage provides several reasons to support this assertion:
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.
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.
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.
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.
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.
In conclusion, innovation is not just a desirable trait but an essential one for MSMEs. It allows them to stay competitive, meet diverse needs, and contribute significantly to various sectors, including high-tech areas like space missions. The adaptability, resilience, and innovative spirit of MSMEs make them a vital component of the economic growth and development of the country.
6. ‘Creativity and Innovation is the key to MSME’. Justify the statement.
Creativity and innovation are indeed the cornerstones of Micro, Small and Medium Enterprises (MSME). The given passage provides ample evidence to support this assertion:
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.
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.
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.
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.
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.
In conclusion, creativity and innovation are not just supplementary traits for MSMEs; they are fundamental to their identity and success. These qualities enable MSMEs to diversify their offerings, contribute to advanced sectors, adapt to global challenges, and forge meaningful collaborations, thereby solidifying their crucial role in the economic landscape.
1. Prepare a profile of anyone MSME operating locally in your area. Prepare a questionnaire to find out:
The growth prospects of the unit.
Use of local resources and indigenous skills used.
The actual problems faced by an owner of a MSME. Prepare a project report on it.
Marketing of products and services
Profile of a Local MSME: Aarav Handicrafts of Rajasthan
Introduction: Aarav Handicrafts, nestled in the vibrant city of Jaipur, Rajasthan, is an epitome of traditional Rajasthani craftsmanship. Founded by Aarav Sharma, a passionate artisan himself, the enterprise has been a beacon for preserving the rich cultural tapestry of Rajasthan. With a focus on sustainable and ethical production, Aarav Handicrafts has carved a niche for itself in both domestic and international markets.
The growth prospects of the unit:
Historical Growth: How has the annual turnover of Aarav Handicrafts changed over the past five years?
Expansion Plans: Are there any upcoming plans to open new outlets or workshops in other parts of India or abroad?
Product Diversification: Is Aarav Handicrafts considering introducing any new product categories or collaborating with contemporary designers?
Use of local resources and indigenous skills:
Material Sourcing: From where does Aarav Handicrafts source its raw materials, and how does it ensure they are ethically procured?
Artisan Training: Does the enterprise run any training programs for young artisans to learn and carry forward traditional Rajasthani craftsmanship?
Sustainability: How does Aarav Handicrafts ensure minimal wastage and an eco-friendly production process?
The actual problems faced by an owner of an MSME:
Financial Hurdles: How does Aarav Handicrafts manage the financial challenges, especially during off-seasons or economic downturns?
Raw Material Fluctuations: How does the enterprise tackle the inconsistent availability or price fluctuations of raw materials?
Modernization vs. Tradition: How does Aarav Handicrafts strike a balance between keeping traditional methods intact while adapting to modern market demands?
Marketing of products and services:
Branding: How does Aarav Handicrafts position itself in the market, especially against competitors?
Collaborations: Are there any tie-ups with e-commerce platforms, tourism boards, or international trade fairs to showcase products?
Customer Feedback Mechanism: How does the enterprise collect and implement feedback to improve its offerings?
Project Report:
MSME and Business Entrepreneurship:
Aarav Handicrafts stands as a testament to the power and potential of MSMEs in India. By bridging the gap between age-old traditions and contemporary market needs, it showcases the versatility and resilience of such enterprises.
Role of MSME: Aarav Handicrafts, like many other MSMEs, plays a pivotal role in regional development. It not only provides employment to local artisans but also ensures that the rich traditions of Rajasthan are showcased to a broader audience.
Challenges Faced by MSMEs: Despite its success, Aarav Handicrafts faces challenges typical of MSMEs, from financial constraints to navigating the balance between tradition and innovation. Yet, with its commitment to quality and authenticity, it continues to thrive.
Conclusion: MSMEs like Aarav Handicrafts are the lifeblood of India’s cultural and economic landscape. They encapsulate the spirit of entrepreneurship, innovation, and tradition, driving forward both regional and national growth.
2. Find out the GI tag(s) for your sate. Prepare a chart showing its unique attributes. Discuss in the class how GI tag for the product has led to regional development.
Geographical Indication (GI) Tags of Rajasthan:
Introduction: A Geographical Indication (GI) is an indication that identifies agricultural, natural, or manufactured products (including handicrafts, industrial goods, and foodstuffs) originating from a specific geographical territory. The given quality, reputation, or other characteristics of these products are essentially attributable to their geographical origin.
GI Tags of Rajasthan: For the purpose of this assignment, let’s assume that the state in question is Rajasthan. Rajasthan is known for its rich cultural heritage and traditional crafts. Some of the prominent GI tags from Rajasthan include:
Rajasthani Blue Pottery: Known for its unique blue dyeing and intricate hand-painted designs.
Kota Doria Sarees: Lightweight sarees made in the Kota region, known for their unique square-like patterns called ‘khat.’
Molela Clay Work: Traditional terracotta craft of the Molela region.
Chart Showing Unique Attributes:
GI Tag
Unique Attributes
Rajasthani Blue Pottery
– Turquoise blue color
– Hand-painted motifs
– Made from Egyptian paste
Kota Doria Sarees
– Lightweight
– Square patterns called ‘khat’
– Blend of cotton and silk
Molela Clay Work
– Terracotta craft
– Depicts folklore and mythological tales
– Wall hangings
Discussion on Regional Development due to GI Tags:
The GI tags have significantly contributed to the regional development of Rajasthan:
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.
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.
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.
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.
Conclusion: GI tags play a crucial role in preserving the cultural heritage of a region while also contributing to its economic growth. Rajasthan, with its rich tapestry of traditional crafts, stands as a testament to the benefits of GI tags in promoting regional development.
Note: For this project/assignment, we’ve chosen Rajasthan. Students need to choose their own state and prepare accordingly. You can use this as a reference.