Entrepreneurship Development Entrepreneurship development is the means of enhancing the knowledge and skill of entrepreneurs through several classroom coaching and programs, and training. The main point of the development process is to strengthen and increase the number of entrepreneurs.

1. ED unit 2
Entrepreneurial Environment

2. Entrepreneurial Environment
•Business environment
•Types of Ownership
•Government policies for small scale enterprises
•Small enterprises in International Business

3. Factors influencing the emergence of entrepreneurship
•Environment means the surroundings, external objects,
influences or circumstances under which someone or
something exists.
•Davis Keith defines the environment as “the aggregate of
all conditions, events, and influences that surround and
affect it”.
•The environment imposes several constraints on an
economy and has considerable impact and influence on the
scope and direction of its activities.
• The success of every business depends on adapting itself to
the environment within which it functions.

4. • For example, when there is a change in the government polices,
the business has to make the necessary changes to adapt itself to
the new policies.
• Similarly, a change in the technology may render the existing
products obsolete, as we have seen that the introduction of
computer has replaced the typewriters;
• the colour television has made the black & white television out
dated.
• Again a change in the fashion or customers’ taste, may shift the
demand in the market for a particular product,
• e.g., the demand for jeans reduced the sale of other traditional
wear.

5. •All these aspects are external factors that are beyond the
control of the business.
• So, the business units must have to adapt themselves to
these changes in order to survive and succeed in business.
• Hence, it is very necessary to have a clear understanding of
the concept of business environment and the nature of its
various components.

6. • The term ‘business environment’ means external forces,
factors and institutions that are beyond the control of the
business and they affect the functioning of a business
enterprise.
• These include customers, competitors, suppliers, government,
and the social, political, legal and technological factors etc.
• Some of these factors or forces may have direct influence over
the business firm, others may operate indirectly.
• Thus, business environment may be defined as the total
surroundings, which have a direct or indirect bearing on the
functioning of business.

7. • It may also be defined as, “the set of external factors, such
as economic factors, social factors, political and legal factors,
demographic factors, technical factors etc., which are
uncontrollable in nature and affects the business decisions
of a firm”.

8. Business decisions and environment

9. •On the basis of the above discussion, the features of
business environment can be summarised as follows:-
•Business environment is ,”the sum total of all factors
external to the business firm and that greatly influences
their functioning”.
•It covers factors and forces like customers, competitors,
suppliers, government, and the social, cultural, political,
technological and legal conditions.
•The business environment is dynamic in nature, that means
it keeps on changing.

10. • The changes in business environment are unpredictable.
• It is very difficult to predict the exact nature of future
happenings and the changes in economic and social
environment.
• Business Environment differs from place to place, region to
region and country to country.
• Political conditions in India differ from those in Pakistan.
• Taste and values of the people in India and China vary
considerably.

11. Relationship between Entrepreneurship and Environment
•Entrepreneurship is nurtured in an environment which has a
positive individual level environment, firm level
environment and macro level environment.
• It is dependent upon phenomenon of economic, social,
political, psychological factors often termed as supporting
conditions to entrepreneurship development.
•These all factors of environment are may have both positive
and negative influences on the emergence of
entrepreneurship.

12. •Positive influences constitute facilitating and conducive
conditions for the emergence of entrepreneurship,
•Negative influences create constraints to the emergence of
entrepreneurship.
•There is a close and continuous interaction between the
business and its environment.
•This interaction helps in strengthening the business firm and
using its resources more effectively.
• As stated above, the business environment is multifaceted,
complex, and dynamic in nature and has a far-reaching
impact on the survival and growth of the business.

13. • To be more specific, proper understanding of the social,
political, legal and economic environment helps the business in
the following ways:
• Determining Opportunities and Threats: The interaction
between the business and its environment would identify
opportunities for and threats to the business.
• It helps the business enterprises for meeting the challenges
successfully.
• Giving Direction for Growth:
• The interaction with the environment leads to opening up new
frontiers of growth for the business firms.
• It enables the business to identify the areas for growth and
expansion of their activities.

14. • Continuous Learning:
• Environmental analysis makes the task of managers easier in
dealing with business challenges.
• The managers are motivated to continuously update their
knowledge, understanding and imparting skills to meet the
predicted changes in realm of business.
• Image Building:
• Environmental understanding helps the business organisations in
improving their image by showing their sensitivity to the
environment within which they are working.
• For example, in view of the shortage of power, many companies
have set up Captive Power Plants (CPP) in their factories to meet
their own requirement of power.

15. •Meeting Competition:
• It helps the firms to analyse the competitors’ strategies and
formulate their own strategies accordingly.
•Identifying Firm’s Strength and Weakness:
•Business environment helps to identify their individual
strengths and weaknesses, in view of the technological and
global developments.

16. Importance of Entrepreneurial Environment
• Some of the major macro-level reasons for the current growth in
entrepreneurial activities are as follows:
• Industry Structure:
• Performance, in terms of economic growth, is shaped by the
degree to which the prevalent industry structure efficiently
utilizes scarce resources.
• The recent technological changes have led to an industry structure
that is generally shifting towards a bigger role of small firms.
• New Technologies:
• This factor is related to the changes in industry structure.
• Fundamental changes in nature of technological development
have led to dis-economies of scale.

17. • Deregulation and Privatization:
• Now companies have to deal with fewer licenses and government
controls.
• Many state owned- enterprises have also been privatized, leading to a
greater role for the private sector in general and entrepreneurs in
particular.
• Formation of New Business Communities:
• Efficiency across markets, primarily resulting from use of new
technologies has led to declining cost of transactions.
• Recent advances in the information technology and internet have
made inter-firm coordination relatively cheaper compared to intra-
firm coordination.
• This promotes setting up of new firms in the new-age business
communities.

18. • Increasing Demand for Variety:
• Increased wealth has led to the increase in the demand for variety,
which in turn is advantageous to the small firms.
• Service sector growth:
• Increase in per capita income leads to a greater share of the services
sector in the national economy.
• Government Incentives and Subsidies:
• Government incentives and subsidies encourage entrepreneurship.
• Increasing flow of Information:
• Information is the lifeblood of business and it is being increasingly
democratized.
• The information technology has revolutionized the way business is
transacted.

19. • Easier Access to Resources:
• It is easier for an entrepreneur to access debt and equity finance than
ever before.
• Entrepreneurial Education and Education in General:
• Many universities and institutions are nowadays offering
entrepreneurship education.
• Return on Innovation:
• Strengthening of intellectual Property Rights (IPR) has acted as a major
boost to entrepreneurs willing to take a risk on an innovation.
• Successful Entrepreneurs as Hero:
• Dhirubai Ambani and Narayan Murthy have become heroes to the
middle class.
• Middle class reveres them as super-achiever and try to follow them.

20. • High Regard for Self-Employment:
• Self employment is thought of as the best way to achieve a variety
of personal goals.
• Rising Dissatisfaction at Job:
• Employers are finding it hard to retain talented employees.
• Employees have confidence in their abilities, which in turn
prompts them to find alternate employment.
• Acceptance of Ex-entrepreneurs in the Job Market:
• Companies are willing to re-employ people who have been
entrepreneurs.
• All these changes in the environment have a positive impact on
entrepreneurship and entrepreneurial activities in the economy.

21. Factors Affecting Entrepreneurial Growth
•Some of the major conditions which influence the
emergence of entrepreneurship in an economy can be
classified and discussed under these categories:
•Economic, Non-economic and Government factors.
•Economic Factors:
•From the economic point of view, it can be said that that
the same factors which promote economic development
account for the emergence of entrepreneurship also.
•Some of these factors are as follows:

22. • Capital:
• Capital in finance and accounting, refers to the funds provided by
lenders (and investors) to businesses to purchase real capital
equipment for producing goods/services.
• Real Capital or Economic Capital comprises physical goods that
assist in the production of other goods and services, e.g. shovels
for gravediggers, sewing machines for tailors, or machinery and
tooling for factories.
• Capital is one of the most important prerequisites to establish an
enterprise and is regarded as lubricant to the process of
production.

23. • Labour:
• The quality rather quantity of labour is another factor which
influences the emergence of entrepreneurship.
• It is observed that cheap labour is often less mobile or
immobile.
• To a certain extent, problems of labour shortage can be
handled with the use of capital extensive technologies as
adopted by some of the developed economies like Japan,
Germany etc.

24. • Raw materials:
• Raw material is the basic material from which a product is
manufactured or made.
• For example, the term is used to denote material that
came from nature and is in an unprocessed or minimally
processed state.
•The necessity of raw materials needs emphasis for
establishing any industrial activity and have its influence on
the emergence of entrepreneurship.

25. •Markets:
•The potential of the market constitutes the major
determinant of probable rewards from entrepreneurial
function.
•The size and composition of market both influence
entrepreneurship.
•Whether or not the market is expanding and the rate at
which it is expanding are the most significant characteristics
of the market for entrepreneurship emergence.
•The survival and success of each and every business
enterprise depend fully on its economic environment.

26. •The main factors that affect the economic environment
are:
•A. Economic Conditions:
•The economic conditions of a nation refers, to a set of
economic factors that have great influence on business
organisations and their operations.
•These includes: gross domestic product, per capita
income, markets for goods and services, availability of
capital, foreign exchange reserve, growth of foreign trade,
strength of capital market etc.
•All these help in improving the pace of economic growth.

27. •B. Economic Policies:
•All business activities and operations are directly influenced
by the economic policies framed by the government from
time to time.
•Some of the important economic policies are:
•a. Industrial Policy:
•The Industrial policy of the government covers all those
principles, policies, rules, regulations and procedures, which
direct and control the industrial enterprises of the country
and shape the pattern of industrial development.

28. • b. Fiscal Policy:
• It includes government policy in respect of public expenditure,
taxation and public debt.
c. Monetary Policy:
• It includes all those activities and interventions that aim at
smooth supply of credit to the business and a boost to trade and
industry.
• d. Foreign Investment Policy:
• It includes all those activities and interventions that aim at
smooth supply of credit to the business and a boost to trade and
industry.

29. •e. Export –Import Policy (EXIM Policy):
• It aims at increasing exports and bridges the gap between
expert and import.
•Through this policy, the government announces various
duties/levies.
• The focus now-a-days lies on removing barriers and controls
and lowering the custom duties.
• The government keeps on changing these policies from time
to time in view of the developments taking place in the
economic scenario, political expediency and the changing
requirement.

30. Non-economic factors:
•Some major non-economic factors allege to influence the
emergence of entrepreneurship is as follows:
•Social Conditions:
•The norms and values within a socio-cultural setting have
relevance for the emergence of entrepreneurship in a
particular society.
•Legitimacy of Entrepreneurship:
•Such system is referred to as ‘legitimacy of
entrepreneurship’ in which the degree of approval or
disapproval granted by the society which influences the
entrepreneurial behaviour of individuals.

31. •In India, if you fail in your business, it is used to bring a kind
of social stigma and loss of capital.
•But that was the situation in past, now the stigma related to
the failure of the enterprise is not taken as the failure of the
individual.
•Entrepreneurship will be more likely to emerge in setting in
which legitimacy is high.
•The government actions towards the development of the
entrepreneurial culture can turn around the negative or low
legitimacy of entrepreneurship.

32. •Social Mobility:
•Social mobility involves the degree of mobility, both social
and geographical, and the nature of mobility channels
within a system.
•The social mobility is crucial for entrepreneurial emergence
and conducive to entrepreneurship.
•The degree and nature of social mobility is largely
determined by other non- economic factors.

33. • Marginality:
• Some of the authorities on entrepreneurship believe that social
marginality also promotes entrepreneurship.
• They believe that individuals or groups on the perimeter of given
social system or between two social systems provide the
personnel to assume the entrepreneurial roles.
• They may be drawn from religious, cultural, ethnic or migrant
minority groups, and their marginal social position is generally
believed to have psychological effects which make
entrepreneurship particularly attractive for them.
• Adversity leads to the development of the entrepreneurial
capacities.

34. •Security:
•Entrepreneurial security is a important facilitator of
entrepreneurial behaviour.
•Security is a significant factor for entrepreneurship
development.
•This is because, if individuals are fearful of losing their
economic assets or of being subjected to various negative
sanctions, they will not be inclined to increase their
insecurity by behaving entrepreneurially.

35. • Psychological and Individual Factors:
• Many of the entrepreneurial researchers and theorists have
propounded theories of entrepreneurship that concentrate
specifically psychological and individual factors.
• These factors are as follows:
• Need Achievement:
• Need for achievement means the drive to achieve a goal.
• According to McClelland, a constellation of personality
characteristics which are indicative of high need achievement is
the major determinant of entrepreneurship development.
• Therefore, if the average level of need achievement in a society is
relatively high, one would expect a relatively high amount/ level
of entrepreneurship development in that society.

36. • Withdrawal of Status Respect:
• Hagen attributed the withdrawal of status respect of a group to
the genesis of entrepreneurship.
• Giving a brief sketch of history of Japan, he concludes that Japan
developed more than non-western society due to two historical
differences.
• First, Japan had been free from colonial disruption, and
• Secondly, the repeated long continued withdrawal of expected
status from important groups (Samurai) in the country’s society
drove them to retreatism, which caused them to emerge a from
traditional values with increased creativity.
• This led them to the technological progress and hence
entrepreneurial roles.

37. •Desire to start Something New:
•This desire of an individual takes him to the higher level of
self- esteem, which leads him/her to start a new venture,
provide and start something new.
•Educational Background and Experience of an Individual:
An individual’s decision to pursue an entrepreneurial career
is dependent on various factors.
•The type of education, training and experience an individual
has acquired, influences the choice of setting up an
enterprise or taking up entrepreneurship.

38. •Technically qualified persons, normally set up their venture
in the field of their specialization, mainly because working in
one’s own area of specialization provides confidence and
reduces the uncertainty associated with the new venture.
• Other factors which can influence the entrepreneurial
spirit are:
• family,
•role models and
• association with similar types of individuals, financial
conditions to start with.

39. • Political Factors:
• Political stability in an economy is another booster of
entrepreneurial activities and lead to the development of
entrepreneurial climate in that economy.
• This includes the political system, the government policies and
attitude towards the business community and the unionism.
• All these aspects, have a bearing on the strategies adopted by the
business firms.
• The stability of the government also influences business and
related activities to a great extent.
• It shows a signal of strength, confidence to various interest
groups and investors.

40. • Next, ideology of the political party also influences the business
organisation and its operations.
• You may be aware that Coca-Cola, a cold drink widely used even now,
had to wind up operations in India in late seventies.
• Again the trade union activities also influence the operation of
business enterprises.
• Most of the labour unions in India are affiliated to various political
parties.
• Strikes, lockouts and labour disputes etc., also adversely affect the
business operations.
• However, with the competitive business environment, trade unions
are now showing great maturity and started contributing positively to
the success of the business organisation and its operations through
workers participation in management.

41. • Legal Environment:
• This refers to set of laws, regulations, which influence the
business organisations and their operations.
• Every business organisation has to obey, and work within the
framework of the law.
• The important legislations that concern the business enterprises
include:
• Companies Act,1956
• Foreign Exchange Management Act,1999 (FEMA)
• The Factories Act, 1948
• Industrial Disputes Act,1972
• Payment of Gratuity Act,1972

42. •Industries (Development and Regulation) Act, 1951
•Prevention of Food Adulteration Act,1954
•Essential Commodities Act,2002
•The Standards of Weights and Measures Act, 1956
•Monopolies and Restrictive Trade Practices Act, 1969
• Trade Marks Act, 1999
•Bureau of Indian Standards Act, 1986
•Consumer Protection Act,1986
•Environment Protection Act
•CompetitionAct,2002

43. • Besides, the above legislations, the following are also form part
of the legal environment of business.
• Provisions of the Constitution:
• The provisions of the Articles of the Indian Constitution,
particularly directive principles of state policy, rights and duties of
citizens, legislative powers of the central and state government
also influence the operation of business enterprises.
• Judicial Decisions:
• The judiciary has to ensure that the legislature and the
government function in the interest of the public and act within
the boundaries of the constitution.
• The various judgments given by the court in different matters
relating to trade and industry also influence the business
activities.

44. • Technological Environment:
• Technological environment include the methods, techniques and
approaches adopted for production of goods and services and its
distribution.
• The varying technological environments of different countries
affect the designing of products.
• For example, in USA and many other countries electrical
appliances are designed for 110 volts.
• But when these are made for India, they have to be of 220 volts.
• In the modern competitive era, the pace of technological
changes is very fast.

45. •Hence, in order to survive and grow in the market, a
business has to adopt the technological changes from time
to time.
•Always, scientific research for improvement and innovation
in products and services is a regular activity in the big
industrial organisations.
•In the current scenario, no firm can afford to get along with
the outdated technologies.

46. • Demographic Environment:
• This refers to the size, density, distribution and growth rate of
population.
• All these factors have a direct bearing on the demand for various
goods and services.
• For example, a country where population rate is high and children
constitute a large section of population, then there is more demand
for baby products.
• Similarly, the demand of the people of cities and towns are different
than the people of rural areas.
• The high rise of population indicates the easy availability of labour.
• These encourage the business enterprises to use labour intensive
techniques of production.

47. •Moreover, availability of skill labour in certain areas
motivates the firms to set up their units in such area.
•For example, the business units from America, Canada,
Australia, Germany, UK, are coming to India due to easy
availability of skilled manpower.
•Thus, a firm that keeps a watch on the changes on the
demographic front and reads them accurately will find
opportunities knocking at its doorsteps.

48. • Natural Environment:
• The natural environment includes geographical and ecological factors
that influence the business operations.
• These factors include the availability of natural resources, weather
and climatic condition, location aspect, topographical factors, etc.,
• Business is greatly influenced by the nature of natural environment.
• For example, sugar factories are set up only at those places where
sugarcane can be grown.
• It is always considered better to establish manufacturing unit near
the sources of input.
• Further, government’s policies are made with a view to maintain
ecological balance, conservation of natural environment.

49. Supportive Government Action
• The government keeps formulating policies and programmes to
promote entrepreneurs in different fields.
• For example, Tax holiday, are one such policy measure.
• The government by its actions or failure to act also influence
both the economic and non-economic factors for
entrepreneurship.
• Any government , which is interested in the economic
development can help; through its clearly expressed industrial
policy promote entrepreneurship.
• By creating facilities, utilities, services, incentives and
concessions, the government can provide the prospective
entrepreneurs, a facilitative socio-economic setting.

50. •The conducive atmosphere minimizes the risk for the
entrepreneurs to encounter.
•Thus, the supportive actions of the government, appear as
the most conducive steps for the entrepreneurial growth in
the economy.
•What makes an economy entrepreneurial? and
•Which policy instruments can be used to form part of what
is now known as ‘entrepreneurship policy?’
•Are traditional economic paradigms ‘out’ and should the
government limit its involvement?

51. •With a shift towards creating the entrepreneurial
economy, and increased calls for public-private
partnerships to achieve this goal, what is the specific role
of the government in creating a favourable environment
and incentives for entrepreneurial activity?
•When you see the above questions, you will come to
know how the govt is supporting.

52. Three-tier Public Intervention
• The determinants of entrepreneurship can be examined at
three distinctive levels of public intervention: –
• the Micro, Industry and Macro levels of entrepreneurship.
• The objects of study within each individual level of analysis
are the individual entrepreneur or business, sectors of
industry and the national economy .
• Micro-level: Focuses on the individual’s decision-making
processes and their motivations for becoming self-
employed.
• It focuses primarily on personal factors like psychological
traits, formal education, skills, financial assets, family
background and previous work experience.

53. •Industry-level:
•It Focuses on the market-side determinants of
entrepreneurship like profit opportunities and
opportunities for entry and exit.
•Macro-level:
•Focuses on the environmental factors like technological,
economic, cultural variables and governmental regulation.

54. Audretsch’s Framework for Public Intervention in Entrepreneurship Policy

55. Entrepreneurial Influences
• 1.BusinessOpportunities:
• According to Audretsch’s framework, business opportunities are
created by technology developments and demand shifts due to
resource availability that can be exploited by existing firms or
through the creation of new ventures.
• Government intervention can affect the extent to which existing
players rather than new firms benefit from these opportunities.
• Competition policy, protection of intellectual property rights,
product and labour market, regulatory environment are examples
of government intervention, which influence the exploitation of
opportunities between new and existing firms.

56. • 2. Capabilities:
• This represents the capabilities of entrepreneurs in recognizing
opportunities, and possessing the ability and resources to pursue
them.
• 3.‘The Choice Filter’:
• The‘Choice Filter’box stands for the individual decision-making
process, when potential entrepreneurs are confronted with the
choice between starting an entrepreneurial venture or another
option (ex. paid employment).
• It outlines the risk-reward profile, which is driven by abilities and
access to resources, individual preferences and attitudes to risk.

57. • 4.Entry and Exit: This shows the entry and exit rates of
entrepreneurs and how occupational decisions determine the actual
level of entrepreneurship.
• Audretsch” assumes that the entry and exit of entrepreneurs will
affect the ‘choice filter’.
• 5. Equilibrium:
• The equilibrium can be seen as the optimal level of business
ownership and entrepreneurship in relation to macro-economic
growth.
• This affects entrepreneurial activities due to cultural forces and
institutional settings such as regulations, incentive structures and the
capital market.
• Discrepancies in entrepreneurial activities or ‘disequilibrium’ can be
restored through market forces or government intervention.

58. Public Intervention
• G.1. Demand-side Intervention:
• This type of intervention impacts on the type, number and
accessibility of entrepreneurial opportunities
• G.2. Supply-side Intervention:
• This type of intervention impacts policies affecting the
number of potential and future entrepreneurs at the
population level.
• This includes, like immigration and regional development
policy, which deal with the dispersion of the population, as
well as family welfare that can impact on age structures.

59. •G.3. Input-related Interventions:
•This type of intervention impacts on the resources and
abilities of potential entrepreneurs.
•Governments can overcome finance and knowledge gaps
through increasing the availability of financial and
informational resources.
•Policies aimed at the development of a venture capital
market, direct financial support and the knowledge base
can be increased through access to business intelligence
and directly through education.

60. •G.4. Preferential Intervention:
•This type of intervention deals directly with the individual
attitudes and preferences of potential entrepreneurs, and
attributed to their values and culture.
•Preferences are shaped by cultural background, and
difficult to modify, but the government can attempt to
shape these by bringing an entrepreneurial culture through
the education system and the media.

61. • G.5. Decision-making Intervention:
• This is directed at the decision-making processes of individual
who prefers to become an entrepreneur. Relevant policies are
taxation, business earnings, social security and labour-market
legislation. This affects the risk-reward profile such as bankruptcy.
• G.6. Demand-side Intervention:
• Closely linked to G1, this intervention influences the accessibility
of markets, which includes reducing the market power of large
firms or reducing barriers to entry.
• It also includes bankruptcy laws, protection of property rights and
the regulatory environment of product and labour markets.

62. • The Economic Rationale for Intervention:
• Audretsch, added this government intervention
channel , which is concerned with the economic and
political concerns for government intervention, and
shapes the determinants of entrepreneurial
equilibrium.

63. Entrepreneurship Development Programmes
• It has been told that entrepreneurs are not born, they are
made.
• Entrepreneurship does not emerge and develop of its own.
• Its emergence and development depends upon an
environment in which entrepreneur can learn and discharge
his/her assigned responsibility in an efficient manner.
•The government play a positive role in the emergence and
development of entrepreneurship by providing training,
incentives, concessions etc., and by creating an
environment conducive for the growth of entrepreneurship.

64. •All these help the entrepreneurs, to undertake creative
actions, thus, entrepreneurial development is essentially a
process in which persons are injected with motivational
drives of achievement and insight to tackle uncertain and
risky situations, especially in business enterprises.
•But the real problem is, how to develop entrepreneurship.
• Hence, Entrepreneurship Development Programmes (EDPs)
are designed and developed to offer solutions to face this
problem.

65. •Meaning of EDP :
•EDP may be defined as a programme designed to help an
individual in strengthening his/ her entrepreneurial motive
and in acquiring skills and capabilities necessary for playing
his/ her entrepreneurial role effectively.
•An EDP stresses on entrepreneurial motivation and
behaviour.
•When any Programme which aims at providing
informational or managerial inputs or focus on
preparation of project without having a touch of
entrepreneurial motivation and behaviour is not
considered as an EDP.

66. • EDP helps in inculcating entrepreneurial traits into a person,
imparting the required knowledge, developing technical,
financial, marketing and managerial skills and building the
entrepreneurial attitude.
• EDP has been recognised as an effective human resource
development tool.
• It is primarily for developing the first-generation entrepreneurs
who on their own cannot become successful entrepreneurs.
• EDP through its continuous process of training and motivation
help them to set up their own profitable enterprise and become
successful entrepreneurs in their own right.

67. •It is not merely a training programme, but it is a
comprehensive programme involving the following process:
•It is a process which enhances the knowledge, skill and
motivation of the potential entrepreneur.
•It is a process which inculcates entrepreneurial behaviour in
the minds of entrepreneur in their day-to- day activities, and
•It is a process through which the potential entrepreneurs
can develop and set up their own enterprise.

68. •EDP aims at achieving the specific objectives of the
programmes through continuous training and motivation.
•What is the Need of EDP:
•Role and relevance of Entrepreneurial Development
Programme (EDP) in the process of economic development
and growth of a nation is immense.
• Various EDPs are designed to develop and improve
entrepreneurial skills and behavioural adjustment needed
to go through the stresses of initial stages.
• Different programmes are designed for different trades,
industries and big projects.

69. •the EDPs are meant to train and develop new
entrepreneurs who act as catalytic agents in the process of
industrialization and economic growth.
•It is the entrepreneur who organises and puts to use capital,
labour and technology in the best possible manner for the
setting up of his enterprise.
•The entrepreneur with his vision and ability to bear the risk
can transform the economic position of the country.
•They play a vital role in initiating and sustaining the process
of economic development of a nation.

70. • It is the EDP, through which the entrepreneurs learn the required
knowledge and skill for running the enterprise successfully which
ultimately contribute towards economic progress in the
following ways:
• 1.Creates Employment Opportunities:
• Acute unemployment has been a chronic problem of most of the
underdeveloped and developing nations of the world.
• EDPs help in solving the problem of unemployment by creating
adequate employment opportunities in setting up of their own
small and big industrial unit where the unemployed are
absorbed.

71. •EDPs help the unemployed to opt for self - employment by
choosing entrepreneurship as a career.
•EDPs help the entrepreneur to get an opportunity to lead on
independent and respectable life in the society and enable
others to get gainful employment.
•Various programmes, schemes like Prime Minister’s Rozgar
Yojana, NREP (National Rural Employment Programme) and
IR (Integrated Rural Development Programme) etc. have
been initiated by Government of India to eliminate poverty
and solve the problem of unemployment.

72. • 2. Helps in achieving Balanced Regional Development:
Successful EDP’s assisting accelerating the pace of
industrialisation in the backward areas and helps in reducing
the concentration of economic power in the hands of a
individual.
• Government encourages to set up industries in the
backward areas to remove wide gap of income and wealth
between the rich and poor.
• The various concessions and subsidies offered by the State
and Central Governments prompted the entrepreneurs to
build their own small and medium industrial units in the
rural and backward areas.

73. • EDP’s in setting up industrial units in the backward
areas lead to the development of rural sector which
helps in achieving balanced regional development.

74. • 3. Prevents Industrial Slums:
•The towns and cities are highly congested and over
crowding due to the growth of industrial slums which results
in overburdening of civic amenities and a lot of problems
including adverse impact on the health of the people.
• EDP’s help in solving the above problems by preventing the
growth of industrial slums through dispersal of industrial
units in different parts of the country including backward
and rural areas.

75. •EDP’s help entrepreneurs to know about the various
schemes, incentives, subsidies and infrastructural
requirements for setting up their enterprises, particularly in
backward and rural areas.
•This checks migration of rural people to urban sector and
thus controls the growth of industrial slums.

76. •Use of Local Resources:
•Lots of available resources remain unutilized due to
absence of initiative and lack of adequate knowledge by
the entrepreneurs.
•Proper use of these resources will help to create a healthy
base, for rapid industrialisation and sound economic
growth.
•EDP’s can help in the proper use of locally available
resources by providing proper training, guidance and
education to the potential entrepreneurs.

77. • 5.Easing Social Tension:
• EDP’s help in channelizing on right lines, the talent and energies
of unemployed youth, feel frustrated after completing their
education without a job or source of livelihood.
• Unemployment and frustration amongst the young and educated
people lead to social unrest and tension.
• EDPs help in diverting the talent of the youth towards self-
employment careers by establishing their own enterprises and
thus creating employment opportunities for the unemployed.
• In this way, EDPs are able to defuse the social tension and unrest
among the youth.

78. •6. Economic Independence:
•The entrepreneurs through EDP’s are able to achieve
economic independence of a country by producing a variety
of better quality goods and services at competitive prices.
•They also through export promotion and import
substitution able to earn and save the foreign exchange
which is essential for the growth and development of any
economy.

79. • 7. Improves the Standard of Living and Per Capita Income:
•EDP’s provide the necessary support to entrepreneurs by
educating them about the test innovation and techniques of
production to produce a large variety of quality goods and
services at competitive prices.
• EDPs also help in establishing more enterprises which
provide employment opportunities and help in increasing
the earning of the people.
• It will result in increase in per-capita income and helps in
the improvement of standard of living of the people.

80. • 8. Helps in the Overall Development of the Nation:
Entrepreneur acts as a catalyst which helps in enhancing the
various activities involved a business enterprise.
• In recent years, EDP package have become a vital strategy for
harnessing the vast untapped human skills, and put them
into industrial development.
• It results in the emergence of entrepreneurial opportunities
in various fields which leads to all-around development in a
country.

81. Objectives
•The EDPs was considered as a part of the Industrial Policy
which was articulated in the Five Year National Economic
and Social Development Plans, with the following
important objectives:
•To identify and train potential entrepreneurs.
•To develop necessary knowledge and skills among the
participants.
• To help in analysing the various options to select the most
appropriate product suiting to the entrepreneur and the
market.

82. • To give a clear picture about the process and procedures
involved in setting up an small scale Industrial unit or a
bigger unit.
• To develop and strengthen entrepreneurial quality and
motivation or need for achievement.
• To motivate the entrepreneurial instinct.
• To impart the basic managerial skills and understandings to
run the project efficiently and effectively.
• To analyse the environmental issues to be addressed
relating to the proposed project.

83. •To develop various business-related skills of
marketing, quality management production,
distribution and human resource management etc.
•To make the potential entrepreneurs know about
the possible risks and failures of the project and
make them learn how to overcome these
problems.
•To enable the entrepreneurs to communicate
clearly and effectively.

84. •To develop team building, technology up-gradation, growth
and above all broad vision about the business.
•To develop a passion for integrity, honesty and industrial
discipline.
•To make him learn the basics of Industrial Laws, Factories
Act and workers rights and expectations. So, that he can
easily overcome the legal problems.
•To formulate the detailed Project Report or projects for the
products.

85. Course Contents and Curriculum
•The course content of an EDP are selected according to the
objectives of the EDP’s.
•The training programme is usually for six week’s duration
and also programs range from three weeks to six months.
•1. Contents of Training Programme:
•There are different kinds of participants having different
back grounds and qualities to attend the entrepreneurial
development programme.

86. •2. General Introduction to Entrepreneurship:
•First of all, the participants are exposed to a general
knowledge of entrepreneurship, factors affecting small-scale
industries, the role of entrepreneur in economic
development, entrepreneurial behaviour and the facilities
available for establishing small- scale enterprises.

87. • 3. Achievement Motivation Training:
• Development of achievement motive is essential to develop
human resources.
• The main aim of achievement motivation training is to
develop the need and desire to achieve, risk-taking,
initiative ,personal behavioural qualities, the self-
awareness ,self-confidence , to think positively and
realistically.

88. •The training aims at enhancing the need for achievement
among the participants.
•It is an important input of entrepreneurship training.
•It tries to make the participants to start their own business
enterprise after the completion of the training programme.
• Motivation training help the participants to expand their
business activities and business venture.

89. •4. Managerial/Management Skill:
•Running a busines or starting an enterprise requires
managerial skills.
•To be imparted with basic and essential managerial skills in
the functional area like finance, production, marketing etc.,
•It should involve all the managerial factors such as planning,
organization, coordination, leadership, supervision, control
etc.,

90. • 5.Support Systems and Procedures:
• The training relating to support systems and procedure should
be imparted to participants.
• The participants must be able to understand the functioning of
various agencies like commercial banks ,financial institutions,
industrial service corporations and institutions dealing with
supply of raw materials, equipment, marketing etc.,
• This helps the participant to understand the support system,
procedures for approaching them, applying and obtaining
support from them and availing of the services provided by
these agencies.

91. •6.Market Survey:
•An opportunity to conduct market survey and to select the
project is provided to participants. This will help them to
understand the actual situation of the market.
•7.Fundamentals of Project Feasibility Study and Business
Plan Development :
•The participants are provided with guide lines on the
effective analysis of feasibility of the particular project in
light of marketing, organization, technical, financial and
social aspects.

92. •Knowledge is imparted to know, how to prepare the Project
or Feasibility Report for certain products.
•The aim of any EDP should be such that, all the
participants, at end of the programme, have a business
plan in their hand prepared by themselves under the
guidance of the trainer, mentors and local entrepreneurs.

93. • 8. Technical Knowledge and Skills:
• After the choice of a particular organisation by a potential
entrepreneur, the in-depth knowledge about the technical aspect
of the trade should be imparted to him, which would enable him
to understand the process of manufacturing and trading.
• 9.Plant Visits:
• In order to familiarise the participants with real life situations in
business, plant visits are also arranged.
• Such visits help the participants to know about an entrepreneur’s
behaviour, personality, thoughts and aspirations.
• No of field trips to industrial units are helpful to understand the
economic aspects of the technology.

94. • 10. Meet an Entrepreneur:
• One of the important content of EDP should be ‘Meet an
Entrepreneur’. The local entrepreneur should be invited to
share his/ her experience with the trainees , which would
encourage and motivate the entrepreneur.
• For developing the course content and curriculum, the
course organisers should begin with a clear understanding
of the feasibility and objectives of the programme, focusing
on the development of ventures with the potential for rapid
growth.

95. • The following should be taken care of while developing
course content:
• From the beginning, the real focus must be on
entrepreneurship or self- employment; then decide on the
objectives accordingly.
• Entrepreneurship Development should be about helping
people to start and grow dynamic businesses.
• It is useful to look at potential growth sectors or geographic
areas and to explore criteria for selecting beneficiaries who
are entrepreneurial.

96. • A needs assessment before programme formulation is essential .
• An analysis of high-growth economic sectors, enables focused
support to potential entrepreneurs in the most promising sectors
of the economy.
• To identify the risks and determine the likelihood of success.
• Identify the factors that affect the levels of entrepreneurship in a
country, which include the perception of opportunity, degree of
respect accorded to entrepreneurs, acceptance of wide
disparities in income and a family environment which is oriented
towards business.

97. •Think yourself like an entrepreneur, when designing
entrepreneurship development projects, and involve
private sector representatives in the design process.
•11. Develop Criteria to Select the Target Group
•The selection of those entrepreneurs should be based on
clear and transparent criteria.
•Normally, potential entrepreneurs would show initiative,
ambition, business sense, foresight, and decisive.

98. • Promising entrepreneurs should be nurtured and helped to serve
as role models and mentors for their communities.
• Measures to target the groups, can mitigate income inequality
and be effective in empowering disadvantaged groups like
women, youth and minorities.
• 12. Identify the size of the Market through an Intensive
Preparation Process, Searching for Innovate and Growth
Potential:
• In an entrepreneurial approach, innovative capacity is
considered first, than the size of the market.

99. •Business opportunity surveys, provide advice to potential
entrepreneurs, but they must be analysed in the specific
market situation in each and every case.
•To determine market potential, it is useful to conduct a
need assessment or demand survey before programme
formulation.

100. •13. Provide Support to Conduct EDPs through Efficient
Organizations :
•Identify the organizations that are well situated to
implement innovative and cost-effective EDPs.
• A good Entrepreneurship Development Institute should be
development oriented ,having operational autonomy,
business connections and flexibility for promotional, fund-
raising and coordination tasks.

101. •EDPs may have to Include Support For the following :
•Entrepreneurship orientation and awareness, improvement
of business performance for growth and competitiveness
etc.
•Entrepreneurship Development training is usually effective,
when linked to finance and other services like marketing,
quality assurance and productivity improvement.
•To provide with an effective, integrated package and there
should be a coordination between programmes and
entrepreneurship development providers, So that, each of
them provides with a different and specialized service.

102. •Programs , normally begins with developing competencies,
move on to supporting the trained candidate with
counselling and other business support.
•One mechanism for integrated support is business
incubators.
•An incubator nurtures, the early-stage businesses through
continuing entrepreneurship development, counselling and
administrative services , by accessing external professional
support and all facilities under one roof.
•It is relevant, where intensive assistance is appropriate.

103. Different Phases of EDP’S
•An Entrepreneurship Development Programme consists of
the following three phases:
•1. Initial or Pre-training Phase
2. Training or Development Phase
•3. Post-Training or Follow – up Phase
•These phases requires different roles to be played by the
entrepreneurship development training providers.

104. Initial or Pre-training Phase
•This phase consists of , the activities and preparations
required to launch the training programme.
•Here, the training programme activities which covers the
identification and selection of potential entrepreneurs ,
provides with initial motivation to entrepreneurs are
covered.
•This phase includes the following:
•a) Creation of infrastructure for training
•b) Publicity campaign for the programme

105. • c) Preparation of training syllabus
•d) Development of application form
• e) Formation of selection committee
• f) Designing tools and techniques for selecting the trainees
• g) Selection of trainees (potential entrepreneurs)
• h) Tie up of guest faculty for the training purpose
•i) Arrangement for inauguration of the programme
• j) Pre-potential survey of environmental opportunities.

106. Training or Development Phase:
• The objective of this phase is to bring desirable change in
the behaviour of the trainees.
• The purpose of training is to develop ‘need for
achievement’ i.e. motivation and skill among the trainees.
• The trainer has to judge how much, and how far the
trainees have moved in their entrepreneurial pursuits.
• Is he/she tuned towards the proposed project idea?
• Is there any change in his/her entrepreneurial outlook, role
and skill?
• How should he/she behave like an entrepreneur?
• What entrepreneurial behavior does the trainee lack?

107. • Is he/she skillful in choosing the right project,
mobilizing the right resources at the right time?
• Does he possess the knowledge of technology,
resources and other related entrepreneurial
knowledge?

108. Post-training or Follow-up Phase:
• The objective of the EDP is to prepare the participants to start their
enterprises.
• This phase involves assessment to judge how far the objectives of the
program have been achieved.
• This phase is also called ‘follow-up’.
• Follow-up indicates the past performance drawbacks, if any, and suggests
guidelines for framing future policies to improve the performance.
• Monitoring and follow-up reveals, drawbacks in the earlier phases and
suggests guidelines for framing the future policy.
• In this phase, infrastructural support, counselling and assistance in
establishing new enterprise and in developing the existing units can also be
reviewed.

109. •In a nutshell, the purpose behind the Entrepreneurship
Development Program Follow-up is to:
•Review the pre-training work
•Review the process of training program; and
•Review past training approach
•Assisting and helping the budding entrepreneurs
•Counselling those participants who have hesitation in
starting their own venture.

110. Evaluation of Entrepreneurship Development Program
•Evaluation of the EDPs is to assess their effectiveness in
developing ‘need for achievement’ among the
entrepreneurs.
•This is also called ‘the qualitative evaluation’ of EDPs.
• McClelland and Winter (1969) used the following criteria to
assess the effectiveness of EDPs in motivating the
entrepreneurs-
•Activity level of the respondents;
•New enterprise established;
•Total investments made;

111. • Investments in fixed assets made
• Number of people employed;
• Number of jobs created;
• Increase in profit;
• Increase in sales;
• Quality of product/service improved; and
• Quicker repayment of loans.
•In other behavioral experiments, the impact of EDPs is
measured with the help of indices relating to the
entrepreneurial behavior.

112. •The entrepreneurial behavior is measured on the following
four dimensions:
•Planning orientation,
•Achievement orientation,
•Expansion orientation, and
•Management orientation.

113. The EDPs are to be evaluated on the following basis:
•1. Program Objectives:
•Evaluation of an EDP may be done with the the central
objectives of the program.
•The objective may be to increase production, to generate
employment, to uplift certain people, etc.
• It becomes easier to assess the goals when they are clearly
defined.

114. • 2. Selection Strategy and Procedure:
• The success of an EDP depends on proper selection of
trainees.
• Therefore, evaluation of selection strategy and procedure is
necessary.
• Hence, Evaluation is done on the basis of selection of
potential entrepreneurs, positive self-concept, initiative,
independence, problem solving, hope of success, searching
environment, and time bound planning.

115. •3. Training Program:
•Next, evaluation can be done on the basis of training
program.
•This covers the contribution of the curriculum and its
design, the content of the program, practical experiences of
the faculty and the follow-up.
• Curriculum design deals with issues like natural and
duration of the program, class schedule, components of the
program, the type of preparation required on the part of
the students and the faculty.

116. •The following criteria may be used for evaluation:
•Comparison of a random sample of entrepreneurs from
the trained group with those of a random sample from
untrained group.
•Comparison of a random sample of entrepreneurs from
the trained group with those from the rejected group.
•Interviewing the trained group to find out their opinion
on the training program.

117. •Surveying the expectations and experiences of
those under training.
•Examination of the curriculum content by a group
of experts.
•Assessment of trained entrepreneurs in their
business operations.

118. • 4. Organizational Policies and Structures:
• Evaluation can be done on the basis of the assessment of
policies, strategies, community needs, training courses, the
structure and process of the organization .
• Creative and flexible structures and processes may set an
example to the trainees.
• The dynamics of the organization and its working have to be
evaluated to see, whether it has requisite self- renewing
characteristics.

119. • Problem faced by EDP:
• Trainer - motivations are not found up to the mark in motivating
the trainees to start their own enterprises.
• ED organization lack in commitment and sincerity in conducting
the EDPs.
• Non-conducive environment and constraints make the trainer -
motivators role in-effective.
• The attitude of the supporting agencies like banks and financial
institutions serves as a block to the success of EDPs.
• Selection of wrong trainees also leads to low success role of EDPs.

120. Institutional support to small entrepreneurs
• SIDO (Small Industries Development Organisation)
• SIDO is a subordinate to the department of SSI and Auxiliary and
Rural Industry (ARI).
• It is an apex body and monitoring the policies for formulating,
coordinating and monitoring the policies and programmes for
promotion and development of small scale industries.
• The main functions of SIDO are classified into
• (1) Co-ordination - To evolve national policies, to coordinate
between various govts.
• To co-ordinate the programmes for the development of industrial
estates.

121. •(2) Industrial development: -
•To reserve items for production by small scale industries,
•To render required support for the development of ancillary
units
•To collect data on consumer items and encourage the
industrial units to produce these items by giving the
assistance.

122. •(3) Extension: -
•To improve technical process, production, selecting
appropriate machinery, preparing factory layout and
design.

123. NSIC (National Small Industries Corporation Ltd)
•NSIC an enterprise under the union ministry of industries,
was set up in 1955:-
• To promote, aid and foster the growth of small scale
industries in the country,
• To provide machinery on hire- purchase scheme to SSI,
• To provide equipment leasing facility,
• To help in export marketing of the provided products of SSI,
• To participate in bulk purchase programme of the
Government,
• To impart training in various industrial trades,
• To undertake the construction of industrial estates.

124. SSIB (Small Scale Industries Board)
• The government of India constituted a SSIB in 1954 to advice
on development of small scale industries in the country.
• SSIB is also known as central small industries board.
• SSIB is created to facilitate coordination and inter
institutional linkages.
• It is an apex advisory body to render service, advice to the
government to all issues pertaining in the development of
SSI.
• 'Industrial minister is the Chairman’ for SSIB.

125. • SSIDC (State Small Industries Development Corporations):-
• SSIDC were set up in various states under the companies act 1956,
as state government undertaking:-
• To cater to the primary developmental need of the tine, village
industries in the state union territories under this jurisdiction.
• Important functions are:-
• (i) To procure and distribute scarce raw materials
• (ii) To supply machinery on hire-purchase system
• (iii) To provide assistance for marketing of the products of SSI.
• (iv) To construct industrial estates/ sheds, providing allied
infrastructure facilities and their maintenance.

126. •SISIs (Small Industries Service Institutes) :-
• The SISIs are set up to provide consultancy and training to
small entrepreneurs both existing and prospective.
• The main functions are:-
• To serve as interface between central and state government
To render technical support services.
• To supply promotional programmes.
• To conduct EDP programmes

127. •The Small Scale Industries have provided opportunities for
self employment to educated young men and experienced
technicians from the middle level of society and contributed
full to the growth of industrial entrepreneurship in our
country.
• Today small-scale industries is regarded as power tool for
balanced regional economic development.
• These achievements are primarily due to the dynamic
enterprising spirit of the small-scale industrialists
themselves.

128. •DICs (The District Industries Centres)
•DICs was started on May 8, 1978 with a view to provide
integrated administrative framework at the distinct level for
promotion of small scale industries in rural areas.
•Functions :
•The DICs role is mainly promotional and development .
•There are 14 (fourteen) District Industries Centres (DICs),
one each in the 14 districts of the state.

129. •There are currently 31 DICs functioning in Tamil Nadu which
is headed by the General Manager in every District.
•The primary objective of the District Industries Centre is to
generate employment by promoting Micro, Small and
Medium Enterprises, Cottage and Handicrafts Industries.
• To achieve the objective of employment generation, District
Industries Centres implement a variety of programmes.

130. •(i) To conduct industrial potential surveys keeping in view
the availability of resources in terms of material and human
skills, infra-structure demand for product etc.,
•(ii) To identify an action to implement the schemes
effectively.
•(iii) To guide entrepreneurs in matters relating to selecting
the most appropriate machinery & equipments, sources of
supply, and procedure for procuring imported machinery.

131. TCO (Technical Consultancy Organisation)
•A network of technical consultancy organizations was
established by the All India Financial Institutions in the
seventies and eighties in collaboration with the state level
financial and development institutions and commercial
banks.
• To cater to the consultancy needs of small business and
new entrepreneurs.

132. •The functions of the TCOs include:
• conducting surveys on industrial potential,
•preparing project profiles,
•undertaking techno-economic appraisal of projects,
• carrying out market research,
•providing technical and managerial assistance to
entrepreneurs,
• assistance in modernisation and technology upgradations

133. Financial Institutions:
• Commercial banks
• IDBI
• IFCI
• ICICI
• LIC
• UTI
• SFCs
• SIDBI
• EXIM BANK

134. •1. Commercial banks :
•Commercial banks are those banks which perform all
kinds of banking functions such as accepting deposits,
advancing loans, credit creation, and agency functions.
•2. IDBI :
•Industrial Development Bank of India was established in
1964 by an act to provide credit and other financial facilities
for the development of the fledgling Indian industry.
•It is a development finance institution and a wholly owned
subsidiary of Life Insurance Corporation.

135. • 3. IFCI:
• IFCI Ltd (IFCI) was set up as a Statutory Corporation (“The
Industrial Finance Corporation of India”) in 1948 for providing
medium and long term finance to industry. Currently, IFCI is a
Government Company with Government of India holding
61.02% of paid-up capital of IFCI.
• 4. ICICI :
• The bank was founded as the Industrial Credit and Investment
Corporation of India Bank, before it changed its name to ICICI Bank.
• The parent company was later merged with the bank.
• ICICI Bank launched Internet Banking operations in 1998.

136. • 5. LIC:
• Life Insurance Corporation of India is an Indian statutory
insurance and investment corporation. It is under the
ownership of Ministry of Finance, Government of India.
• The LIC of India was established on 1 September 1956.
• Life Insurance Corporation of India, which commanded
a monopoly of soliciting and selling life insurance in India,
created huge surpluses and by 2006 was contributing around
7% of India's GDP.

137. • 6. UTI:
• The mutual fund industry in India started in 1963 with the
formation of Unit Trust of India, at the initiative of the
Government of India and Reserve Bank of India.
• It was set up by the Reserve Bank of India and functioned
under the Regulatory and administrative control of the
Reserve Bank of India.

138. •7. SFCs: At present, there are 18 State Financial
Corporations in India.
•Out of these 17 were set up under the State Financial
Corporations Act (SFCs) 1951.
•The Tamil Nadu Industrial Investment Corporation Ltd.
established in 1949 under the Companies Act as Madras
Industrial Investment Corporation, also functioning as SFC.
•The various important functions of State Finance
Corporations are:
•(i) The SFCs provides loans mainly for the acquisition of
fixed assets like land, building, plant, and machinery.

139. •(ii) The SFCs help financial assistance to industrial units
whose paid-up capital and reserves do not exceed Rs. 3
crore (or such higher limit up to Rs. 30 crores as may be
notified by the central government).
•(iii) The SFCs underwrite new stocks, shares, debentures
etc., of industrial units.
•(iv) The SFCs grant guarantee loans raised in the capital
market by scheduled banks, industrial concerns, and state
co-operative banks to be repayable within 20 years.

140. • SIDBI:
• Small Industries Development Bank of India (SIDBI) is the
apex regulatory body for overall licensing and regulation of micro,
small and medium enterprise finance companies in India.
• It is under the jurisdiction of Ministry of Finance , Government of
India headquartered at Lucknow and having its offices all over the
country.
• Its purpose is to provide re-finance , to banks and financial
institutions and engage in term lending and working capital
finance to industries, and serves as the principal financial
institution in the Micro, Small and Medium Enterprises (MSME)
sector.
• SIDBI also coordinates the functions of institutions engaged in
similar activities.

141. •EXIM BANK:
• Exim Bank was established by the Government of India,
under the Export-Import Bank of India Act, 1981 as a
provider of export credit, mirroring global Export Credit
Agencies.
• Exim Bank serves as a growth engine for industries and
SMEs through a wide range of products and services.

142. • EXIM Bank extends Lines of Credit (LOCs) to overseas
governments, financial institutions, regional banks and other
overseas entities, to finance India's exports to those
countries.
•EXIM Bank's LOC is a risk-free, non-recourse export
financing option available to Indian exporters for promoting
their exports.

143. •Other Support Institutions are:
•NSIC
• SIDO
•SSIDC
•SISIs
•INDUSTRIAL ESTATES

144. •NSIC:
•National Small Industries Corporation Limited is a Mini
Ratna government agency established by the Ministry of
Micro, Small and Medium Enterprises, Government of India
in 1955 It falls under Ministry of Micro, Small & Medium
Enterprises of India
•NSIC is the nodal office for several schemes of Ministry of
MSME such as Performance & Credit Rating, Single Point
Registration, MSME Databank, National SC ST Hub, etc.,

145. • SIDO:
•Small Industries Development Organization (SIDO) is a
subordinate office of the Department of SSI & Auxiliary and
Rural Industry (ARI).
•It is an apex body and nodal agency for formulating,
coordinating and monitoring the policies and programmes
for promotion and development of small-scale industries.

146. •SSIDC:
•STATE SMALL INDUSTRIES DEVELOPMENT
CORPORATION (SSIDC)
•Small Industries Development Corporations (SIDCO) are
state-owned companies or agencies in the states of India
which were established under the policy of Government of
India for the promotion of small sale industries.

147. •SISIs:
•Small Industries Services Institute. (SISI) Madras, provides a
comprehensive range of services to the small scale industrial
sector in Tamil Nadu in terms of technical assistance,
Economic information services, provision of workshop
facilities, training and other general consultancy services.

148. • INDUSTRIAL ESTATES:
• An industrial estate is a place where the required facilities
and factory accommodation are provided by the government
to the entrepreneurs to establish their industries there.
•In India, industrial estates have been utilised as an effective
tool for the promotion and growth of small-scale industries.
• They have been used as an effective tool to decentralise
industrial activity to rural and backward areas.
• Industrial estates are also known by different names, e.g.
industrial region, industrial park, industrial area, industrial
zone, etc.

149. • Industrial estate provides premises, i.e. Land and Factory
Shed for the establishment of a new industrial undertaking
and also other amenities such as power, water, transport
etc. at a reasonable, cost.
• Hence the entrepreneur is able to produce goods at cheaper
costs.

150. Government Policies for Small Scale Enterprises
•Government plays a great role in the administration of small
scale business in general, because it operates in the society
controlled by the government and in particular, there are
micro-policies specifically designed to address small
business.
• They regulate production, distribution and marketing.
•Some of the Government Policies for development and
promotion of Small-Scale Industries in India are:

151. •1. Industrial Policy Resolution (IPR) 1948,
•2. Industrial Policy Resolution (IPR) 1956,
•3. Industrial Policy Resolution (IPR) 1977,
•4. Industrial Policy Resolution (IPR) 1980 and
•5. Industrial Policy Resolution (IPR) 1990.

152. • 1. Industrial Policy Resolution (IPR) 1948:
• The IPR, 1948, accepted the importance of small-scale
industries in the overall industrial development of the
country.
• It was realized that small-scale industries are particularly
suited for the utilization of local resources and for creation
of employment opportunities.

153. •However, they have to face acute problems of raw materials,
capital, skilled labour, marketing, etc.,
• Therefore, emphasis was laid in the IPR, 1948 that these
problems of small-scale enterprises should be solved by the
Central Government with the cooperation of the State
Governments.
• In nutshell, the main thrust of IPR 1948, as far as small-
scale enterprises were concerned, was ‘protection.

154. • 2. Industrial Policy Resolution (IPR) 1956:
• The main contribution of the IPR 1948 was that, it set in the
nature and pattern of industrial development in the country.
• The post-IPR 1948 period was marked by significant
developments taken place in the country.
• For example, planning has proceeded on an organised
manner and the First Five Year Plan 1951-56 had been
completed.
• Industries (Development and Regulation) Act, 1951 was
also introduced to regulate and control industries in the
country.

155. • The parliament had accepted ‘the socialist pattern of
society’ as the basic aim of social and economic policy
during this period.
• It was this background , that the declaration of a new
industrial policy resolution in the form of IPR 1956.
• The IPR 1956 provided that along with continuing policy
support to the small sector.
• It also aimed at, to ensure that decentralised sector
acquires importance, to self-supporting and its
development is integrated with that of large- scale industry
in the country.

156. •The SSIB, constituted a working group in 1959 to examine
and formulate a development plan for small scale industries
during the third five year plan (1961 – 1966).
•In the third five year plan period, specific developments like
'Rural Industrial Projects' and 'Industrial Estates Projects'
were started to strengthen the small sector.
•The IPR 1956 for small-scale industries aimed at
“Protection plus Development.”
•Hence, the IPR 1956 initiated the modem SSI in India.

157. • IPR 1977:
The IPR 1977 classified small sector into three categories:
a. Cottage and household industries which provides self
employment on a large scale.
b. Tiny sector , where the investment in industrial unit i.e., plant &
machinery up to Rs.1 lakh ,situated in towns with a population of
less than 50,000 according to 1971 census.
c. Small Scale Industries comprising of industrial unit with an
investment of up to Rs.10 lakhs and in case of ancillary units with
an investment of up to Rs.15 lakhs.
• From the small scale sector was thus, to be 'protected,
developed and promoted'.

158. •IPR 1980
•The Government of India adopted a new industrial policy
resolution (IPR) on July 23, 1980.
•The main objectives of IPR 1980
•1. To facilitate an increase of industrial production through
optimum utilization of installed capacity and expansion of
industries.
• 2. Introduction of the nucleus plants to replace the older scheme of
the district industry centre (DIC), in each industrially background
district to promote the maximum small scale industries there.

159. • 3. Promotion of village and rural industries to
generate economic viability in the villages well
compatible with the environment.
• Thus the IPR 1980, re-emphasized the spirit of 1956.
The small scale sector is considered to be the best
sector in generating wage and self-employment based
opportunities in the country.

160. •IPR 1990
•The IPR 1990 was announced during June 1990.
•As to the small sector, the resolution continued to give
increasing importance to small scale enterprises, to serve
the objective of employment generation.
•The important elements were included in the resolution,
to improve the development of small scale sector were as
follows:-
•The investment ceiling in plant and machinery for small
scale industries was raised from Rs.35 lakhs to Rs.60 lakhs
and for ancillary units from Rs.45 lakhs to Rs.75 lakhs.

161. •Investment ceiling for tiny units has been increased from
Rs.2 lakhs to Rs.5 lakhs , provided the unit is located in the
area having a population of 50,000 as per 1981 census
survey.
• As many as 836 items was reserved for exclusive
manufacture in small scale sector.
•A new scheme of initial investment subsidy, exclusively for
small scale sector in rural and backward areas capable of
generating more employment at lower cost of capital had
been mooted and implemented.

162. •A new scheme of initial investment, with a vision to
improve the competitiveness of the products
manufactured in the small scale sector, programmes of
technology up graduation will be implemented under the
umbrella of an Apex technology development centre in
Small Industries Development Organization (SIDO).
•Greater emphasis on training of women and youth under
EDP (Entrepreneurship Development Programme) and to
establish a special cell in SIDO for the purpose.

163. New Small Enterprise Policy 1991
•The government of India, in the Parliament on August 6,
1991, introduced the new small enterprise policy titled
'Policy measures for promoting and strengthening small,
tiny and village enterprises’.
•The main objective of New small enterprise policy’s are :
•to impact more vitality and growth impetus to the sector
which enable it to contribute fully to the economy ,
•particularly in terms of growth of output, employment and
exports.

164. Salient features of the new small enterprise policy
•The investment limit has been increased in plant and
machinery of tiny enterprises from Rs.2 lakh to Rs.5 lakh
based on their location.
•Inclusion of industry related service and business
enterprises, based on their location as SSI.
•To limit the financial liability of the new entrepreneurs to
the capital investment.
•A new partnership act has been introduced.
•Introduction of a scheme of integrated infrastructural
development including technological backup services for
small scale industries.

165. •Factoring services have to be introduced, to solve the
problems of delayed payment to small sector.
•Market promotion of small scale industries products
through cooperative/ public sector institutions, order
specialized professional and consortium approach.
•In SIDO (small industries development organization), an
export development centre (EDC) has to be set up.
•To widen the scope of National Enquiry Fund (NEF)
•To enlarge the single window scheme, and
•to associate commercial banks with provision of composite
loans.

166. • The new policy is formulated to remove the basic problems
of small sector and measures to mitigate the various
handicaps in that sector.
• The new policy provides for continuous support to the tiny
sector like :
• easier access to institutional finance,
• preference in government purchase and
•relaxation of certain labour laws.
• Since tiny sector is the nursery of the traditional skill, the
incentives will help its growth.
Important points on New small enterprise policy;

167. •Another important feature is the introduction of new legal
form of organization of business, i.e .,restricted (or) limited
partnership.
•As per this form, the liability of at least one partner is
unlimited and the liability of other partner is limited to their
invested capitals.
•This can be considered as a welcome provision.
•It will attract equity capital from friends and relatives ,who
were earlier reluctant to advance their funds due to the
limited liability of the partners.

168. The important plan proposal (1992-1999)
•The main function of the eighth five year plan has been
employment generation as the motive for economic growth
to fulfill these objectives, small and village industries have
been assigned for an extremely important role.
•The important plan proposal in the year 1992-1997 are;
• The plan provides that timely & adequate availability of credit is of
important than other concessional credit.
• So with the establishment of SIDBI, sanction of composite loans
under 'Single Window Concept' concessional loan to state
corporations for their infrastructure development and provision of
factory services have been introduced.

169. •It proposes to establish appropriate tool rooms and training
institution to upgrade technology.
•The growth centre approach has been established to
measure industrial disputes and is under implementation.
• In the year 1992-1997, growth centres are developed and
completed.
• An integrated centre approach has been established in the
eighth plan.

170. New policy initiative in 1997-2000 for the small scale
sector
•Announcement of a new credit insurance scheme in the
year (1999-2000), particularly exported oriented & tiny
units.
•The working capital limit for SSI unit is determined by the
bank on the basis of 20 % of their annual turnover.
•Exemption from excise duty, given to SSI units, will be
extended to goods, bearing a brand name of another
manufacturer in rural area.

171. •A national programme for Rural Industrialization has been
announced, with a mission to setup 100 rural clusters /per
year, to give a lift to rural industrialization.
•Cotton yarn has been introduced in the general exercise
exemption scheme for SSIs.
• The investment limit for small scale and ancillary
undertakings has been reduced from Rs.3 Crores to Rs.1
Crore.
• Small job workers, engaged in printing of glazed titles, have
been exempted from excise duty.

172. Entrepreneurial Initiatives in India-
“Government and Non Government Support”
• Delhi Technical University set up the water technology and
management centre with the support of UNESCO.
• NASSCOM has signed a Memorandum of Understanding
(MoU) with University Grants Commission (UGC), for
•Faculty Development Programme (FDP)
•Re-skilling the faculty in IT
•Framework for co-operation to catalyse industry-
academia interface

173. •Entrepreneurship Development Institute, Government of
Tamil Nadu,
•promoting creation of Entrepreneurial & Innovative
ecosystems in Universities / Colleges / Polytechnics / ITIs.
• EDI is collaborating with WF-NEN to train and orient
management and faculty in learning by doing methodologies
and also in bringing in online Entrepreneurship learning to
college campuses.

174. • Innovation in Entrepreneurship Development Program will
use a HUB and SPOKES model.
•Each College Entrepreneurship & Innovation Hub will
support around 20-40 colleges.
• Centre for Entrepreneurship Development, Anna University
has been selected as Hub for conducting activities in
Chennai region to implement IEDP program where two
faculties will be trained for three days using NEN’s online
course material.

175. •Successful implementation of the program is based on
structured set of activities on campus, ideation, opportunity
evaluation and selection, and management involvement in
the whole process.
•Selection of colleges will be based on the advisory
committee recommendations, largely centred on the
willingness and commitment of applicant institutions.
•An online form has been provided for colleges to register
their interest in the EDI website at:-
• http://editn.in/pages/view/college-iedp

176. The Role of Government in Supporting Entrepreneurship
• The governments should create different types of support institutions:
• i) To provide information on regulations, standards, taxation, customs
duties, marketing issues;
• ii) To advise on business planning, marketing and accountancy, quality
control and assurance;
• iii) To create incubator units providing the space and infrastructure for
business beginners and innovative companies, and helping them to solve
technological problems, and to search for know-how and promote
innovation; and
• iv) To help in looking for partners. In order to stimulate entrepreneurship
and improve the business environment for small enterprises.

177. Policies And Schemes For Promotion Of MSME
Implemented By State Governments
• All the State Governments provide technical and other support services to
small units through their Directorates of Industries, and District Industries
Centres.
• the details of the scheme vary from state to state, the following are the
common areas of support.
• Development and management of industrial estates
• Suspension/deferment of Sales Tax
• Power subsidies
• Capital investment subsidies for new units set up in a particular district

178. •Seed Capital/Margin Money Assistance Scheme
•Priority in allotment of power connection, water connection.
•Consultancy and technical support
•Government of India runs a scheme for giving National
Awards to micro, small and medium scale entrepreneurs
providing quality products in 11 selected industry groups of
consumer interest.
•The winners are given trophy, certificate and a cash price of
Rs. 25000/- each.

179. •Government accords the highest preference to
development of MSME:
•By framing and implementing policies and promotional
schemes like providing incentives for quality upgradation,
concession on excise duty and provides technical
supportive services.
•Thus Government plays a supportive role in developing
entrepreneurs.

180. STATE GOVERNMENTS INCENTIVES FOR INVESTORS
•Many state governments offer incentives to attract
investment in their states. which include incentives such as:
•Land at subsidized prices or Industrial sheds to set up small
scale industrial units.
•Tax concessions for a number of years.
•These may include exemption from sales tax etc., for a
period of time.
•Electric power supply at a reduced tariff.
•Loans and subsidies at very attractive rates of interest.

181. INCENTIVES FOR SETTING UP BUSINESS IN BACKWARD AREAS
• The Government of India & several State Governments provide
several benefits and incentives to promote industrialization of
backward areas.
• Both the central and state governments share the cost of some of
the incentives provided.
• The purpose of such incentives are to develop backward areas
and increase employment for local inhabitants of such areas.
• Some of the incentives offered are:
• Transportation subsidies to promote industries in areas that are
not easily accessible, like remote hilly areas.
• A subsidy of 50% to 90% on transportation costs is available
under this scheme.

182. • A Subsidy at the rate of 15% of the investment
amount in plant and machinery is given under the
capital investment subsidy scheme.
• A subsidy for interest relief is also provided at a rate of
3% for new industrial units in some areas.
• Earlier, setting up an industry in India was not an easy
task, because of bureaucratic requirements that
needed to be fulfilled.
• But, however both the central and state governments
have now made efforts to improve certain things.

183. Industrial Unit Start-up Information for NRIs
• For Non Resident Indians, returning to India to start up
industrial units.
•They find, that there is plenty of talent available in India.
• Hiring the right kind of person make things easier to go
through various Indian regulations.
•While the government, trying to bring out reforms to make
things easier for foreign investors, the attitude of certain
officials is difficult to change.
•Those who face problems should use various channels
available now, to avoid delay and play certain tactics for
personal gain.
•

184. • Returning NRI's who can tolerate the initial
adjustment setbacks in establishing themselves, will
ultimately find the rewards well worth the effort.
• India offers investors tremendous opportunities and
one such is locations for industrial investment.

185. Loans available for starting Industrial venture in India
•There are two main financial institutions available for loans
for entrepreneurs on the (State / National level):
•1. Industrial Development Bank of India(IDBI)
•2. Industrial Finance Corporation of India (IFCI)
• The IDBI is the head institution in the area of long term industrial
finance.
• It was established under the IDBI Act 1964 as a wholly owned
subsidiary of RBI and started functioning on July 01, 1964.
• Under Public Financial Institutions Laws (Amendment) Act 1976, it
was delinked from RBI.
• IDBI is engaged in direct financing of the industrial activities

186. •The objectives of the IDBI are:-
• to create a principal institution for long term finance,
•to coordinate the institutions working in this field for
planned development of industrial sector,
•to provide technical and administrative support to the
industries and
•to conduct research and development activities for the
benefit of industrial sector.

187. • On the State level, finance is available loans can be
availed from :-
• State Financial Corporation (SFC)
• State Industrial Development Corporation (SIDC).
• Criteria for Business loans:
• Technical assessment of project
• Experience of the entrepreneurs
• Financial & commercial practicality of the project
• Conformity to environmental laws,
• Economic viability of the project

188. How to apply for business loans in India – Loan
application procedure
•1. To submit a detailed project report (business plan)to the
financial institution to IDBI, IFCI or any other financial
institution from where the loan sanction is sought.
• In case, a license is a requirement for the project, the
license should be provided with the project report.
• 2. The financial institution after scrutinizing the project
report, requires any additional information or clarifications,
they ask for this in a few days of receipt of project report.

189. •3. Representative from the financial institution inspect the
site etc., to check the suitability of the project.
•At this stage, discussions on various aspects of the project
are discussed and final project costs are calculated.
•4. The financial institution gives its approval, if they find
the project feasible.
•Loans provided for business ventures, can be for equipment
and fixed assets as well as working capital.
•

190. •If a project is viable and the entrepreneur has approximately
25% of his own funds.
•Then 75% can be financed. In addition to this loans can be
availed for working capital also.
•In case you can provide proof of your expertise in the
project there is always the possibility that your loans may be
sanctioned with a lesser amount of cash investment on your
part.
•Projects costing up to Rupees 5 crores can normally be
financed on the state level.

191. •Financial institutions follow guidelines such as debt-equity
ratio, entrepreneur’s contribution to the project, etc., when
deciding on loans.

192. Small Enterprises in International Business
• The small sector has emerged as a dynamic and vibrant
sector of the Indian economy in the recent years.
• Export Performance and Trends of Small Enterprises :
• The total exports of the country increased by 43 times, while 'the
exports from small enterprises increased by about 155 times',
information given in the table is from direct exports only small
enterprises makes indirect exports through merchant exporters,
trading houses and large enterprises.
• 'Indirect exports is 10% of total exported' (estimated)
• It is expected to increase in future when the ongoing economic
reforms in the country start giving results.

193. •The export performance of smalls sector exhibits some
disturbing features:
•(1) About 83% of total exports from small sector accounted
for by four items alone denotes the lack of diversification in
export items of small sector.
•Even the items having good potential for exports like leather
products, account for 3 to 4 percent of global exports.
•(2) Hence, in order to boost the SSI exports, the new
potential markets need to be explored and tapped.

194. Major Constraints
•The major constraints encountered by the small scale units
are as follows:
•1. Credit Policy
•The small scale units have very weak base of their own funds
and have no access to other sources of funds like capital
market. Hence, they have to depend upon the state financial
corporations (SFCs) and the commercial banks to meet their
long term and short capital requirements.
• The actual availability of credit from the financial institutions
was very low at 8.1 percent of output.
•In case of tiny units, it was merely 2.7% of their output.

195. Infrastructure
•Lack of infrastructure facilities like power supply,
transportation and communication affect the quality and
quantity of production, its cost and delivery.
•These, in turn, upon the export performance of small
scale units.
•The launching of new scheme of 'Integrated
Infrastructure Development' in rural and backward areas
is a right step in right direction.

196. Technology
•Technology is the crux of quality and competitiveness.
•The government has setup several tool rooms, production-
cum-process development centres, regional testing centres
and workshops, schemes of industrial parks and 18,09,000
to break the prevailing inertia and promote exports from
small scale units.

197. Export Potential of Small Scale Units
•Opportunities exist for small scale sector to emerge a
strong global player especially in the exports of the
following products.
•Food processing industries
•Leather Goods
•Electronic Goods
•Plastic Goods

198. Small Scale Enterprise Shares
• Realising the good export potential of small sector, the
board of Trade & Ministry of Commerce have identified 8
sectors and 15 items respectively for boosting exports from
the small scale sector.