Small Business and Role of Small Business in Indian Economy
The concept of small business has been
defined by different countries in different
ways. The two main criteria used to
define small business are as follows
SIZE OF THE BUSINESS
Size refers to the scale of operations. Size may
be measured in the following ways : -
a.Total capital investment
b.The value of total assets or fixed assets.
c.Total investment in plant and machinery
d.The total number of persons employed
e.Volume/value of production
f.Volume/value of sales turnover
g.A combination of above
Table 5.1 Bases of Defining small business in various countries
1. Investment in plant and machinery
3. Investment and employment
4. Production/sales turnover
5. Employment and sales turnover
6. Investment and sales turnover
India, Pakistan, Indonesia
USA and UK
Japan, Korea and Phillipines
China, UK (commercial)
What is MSME ?
Micro, Small or Medium Enterprise?
The earlier concept of ‘Industries’ has been
changed to ‘Enterprises’
• Enterprises have been classified broadly into:
(i) Enterprises engaged in the
Manufacture / production of
Goods pertaining to any industry; &
(ii) Enterprises engaged in providing
/ Rendering of services.
Manufacturing enterprises have been defined in
terms of investment in plant and machinery
(excluding land & buildings) and further classified
- Micro Enterprises -
investment up to Rs.25 lakh.
- Small Enterprises -
investment above Rs.25
lakh & up to Rs. 5 crore
- Medium Enterprises -
investment above Rs. 5
crore & up to Rs.10 crore.
Service enterprises have been defined in
terms of their investment in equipment (excluding
land & buildings) and further classified into:
- Micro Enterprises –
investment up to Rs.10 lakh.
- Small Enterprises –
investment above Rs.10 lakh & up to Rs.2 crore.
- Medium Enterprises–
investment above Rs. 2 crore & up to Rs. 5 crore
Qualitative Criteria :
Size does not always reflect the true nature of an
enterprise. Its characteristics differentiate between
big and small business. These characteristics are :-
b.Nature of management
d.Geographical area of operations
Definition of small business in India
1. “An undertaking having an investment in plant and
machinery of not more than Rs. 5 crores.”
Now the government of India has raised the limit of
Rs. 3 crores .In 1996, the official definition of small
business was as follows:
i. Small Scale Industries
ii. Ancillary Industries
iii. Tint Units
iv. Small Scale Service Establishments
v. Household Industries
Role Of Small Business In Indian Economy
2. Optimisation Of Capital
3. Balanced Regional Development
4. Mobilisation Of Local Resources
5. Export Promotion
6. Consumer Surplus
7. Feeder To Large Scale Industries
8. Social Advantage
9. Share In Industrial Production
10. Development Of Entrepreneurship
IMPORTANCE OF SMALL BUSINESS
The small scale industries are playing an
important role in the GDP of India. The small
scale industries have nearly 40% share in the
total industrial output and 35% share in
To increase employment.
To prevent unequal distribution of income.
To develop capital investment.