Module 4 Entreprenurship Development

Government Policies for
Development and Promotion
of Small-Scale Industries in
India
 There are many Government Policies for
development and promotion of Small-
Scale Industries in India. These are
mentioned as below:
◦ Industrial Policy Resolution (IPR) 1948

Industrial Policy Resolution (IPR)
1948:
 The IPR, 1948 for the first time, accepted the
importance of small-scale industries in the overall
industrial development of the country. It was well
realized that small-scale industries are
particularly suited for the utilization of local
resources and for creation of employment
opportunities.
 However, they have to face acute problems of
raw materials, capital, skilled labour, marketing,
etc. since a long period of time. 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.’

Industrial Policy Resolution
(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
sufficient vitality to self-supporting and
its development is integrated with that
of large- scale industry in the country.
To mention, some 128 items were
reserved for exclusive production in
the small-scale sector.

Industrial policy resolution
(IPR)1977
 It emphasize that whatever can be produced
by SSIS must only be so produced. The main
thrust of policy was effective promotion of
cottage, village and small industries widely
dispersed in rural areas and small towns.
This thinking specified the following things:
◦ 504 items were reserved for exclusive production
in the small-scale industries.
◦ The concept of District Industries ICs) was
introduced so that in each district a single agency
could meet all the requirements of SSIs under
one roof.

 It stated that besides continuing the
policy support to cottage, village and
small industries by differential taxation
or direct-subsidies, the aim of state
policy would be that the development
of this sector is integrated with that of
large scale industry.

 Technological up gradation was
emphasized in traditional sector.
 Special marketing arrangements
through the provision of services, such
as, product standardization, quality
control, marketsurvey, were laid down

Industrial policy resolution (IPR)
1980
 Investment limit was raised for tiny,
small, and ancillary units to Rs. 2 lacs,
Rs. 20 lacs, and Rs. 25 lacs
respectively.
 Reservation of items and marketing
support for small industries was to
continue.
 Availability of credit to growing SS
units was continued.
 Buffer stocks of critical inputs were to
continue.

 Agricultural base was to strengthen by
providing preferential treatment to agro-
based industries.
 Stress was reiterated to upgrade
technology to improve competitiveness.
 Special emphasis was laid on training of
women and youth under Entrepreneurial
Development Programmed.
 Activities of Khadi and Village Industries
Commission and Khadi and Village
Industries Board were to expand.

Industrial policy resolution
(IPR)1990
 It raised the investment ceiling in plant
and machinery for SSIS.
 It created central investment subsidy for
this sector in rural and backward areas.
Also, assistance was granted to women
entrepreneurs for widening the
entrepreneurial base.
 Reservation of items to be produced by
SSIs was increased to 836.
 Small Industries Development Bank of
India was established to ensure
adequate flow of credit to SSIS.

DISTRICT INDUSTRIES
CENTERS (DICs)
 District Industries Centers (DICs) provide full assistance to
the entrepreneurs who are going to start the business on their
own and in their regional places. These centers provide
service and support to small entrepreneurs under a single
roof at both pre and post investments.
 The DICs program was started on May 1st in the year of 1978
with a view to providing integrated administrative framework
at the district level for promotion of small scale industries in
rural areas. Providing complete assistance and support to
entrepreneurs in multi-regions are the ultimate aims of DICs.
These DIC programs can take over the responsibilities in
order to promote cottage and small scale industries at district
level effectively.
 DIC’s are the implementing arm of the central and state
governments of the various schemes and programmes.
Registration of small industries is done at the district
industries centre and PMRY (Pradhan Mantri Rojgar Yojana)
is also implemented by DIC. Management of DIC is done by
the state government.

OBJECTIVES OF DISTRICT
INDUSTRIES CENTERS (DICS)
The following are the main objectives of DICs:
 To identify the new entrepreneurs and providing
assistance to them regarding their own startup’s.
 To provide financial and other facilities to small
enterprises.
 To enhance the rural industrialization and also the
development of handicrafts.
 To reach economic equality in multiple areas of the
district.
 To allow various government schemes to the new
entrepreneurs.
 To desize the regional imbalance of development.
 To make all the necessary facilities to come under one
roof.

FUNCTIONS OF DISTRICT
The DIC’s programme is funded jointly
by the concerned state and central
government. It took part in various
promotional measures In order to bring
out the development of small unit sectors
in the district level. The DIC’s performs
the following functions mainly:
1. To spot the entrepreneurs: DICs
conducting various motivational
programmes so that they can find new
entrepreneurs throughout the districts.

2. Purchase of fixed assets: To purchase
fixed assets, the DICs suggest loan
applications of the prospective
entrepreneur to some of the concerned
financial and development institutions
like National Small Industries
Corporation, Small Industries Service
Institute etc., DIC’s also recommend
commercial banks so that to meet the
working capital requirement of SSI to
run operations daily

3. Offers subsidies and other incentives:
DICs help the rural people to get subsidies
offered by the government on various
schemes. It leads to the betterment in
boosting financial capacity of the units and
may undergo for further development
activities.
4. Guidance of import and export:
Government provides various types of
incentives for import and export on particular
goods and services. The license to the
importer and exporter is issued on the basis
of recommendation of DIC.

5. Entrepreneurial training programmes:
DICs allow a lot of training programmes for
the rural entrepreneurs who are new to the
business world and also recommend other
institutions to take part in such training
programs. These are intended to give better
assistance to the new entrepreneurs.
6. Provides employment for unemployed
educated ones: The DICs have introduced
a scheme to guide the unemployed
educated youth by providing them facilities
for self employment. The age limits between
18 to 35 years with minimum qualification of
metric or technical trade.

STRUCTURE OF DISTRICT
 DIC’s consists of:
◦ A General Manager.
◦ Functional Managers (4 members).
 Three of the functional managers would be in the
economic investigation domain, credit and village
industries. Whereas the fourth functional manager
may be with the responsibility in any of the areas
such as raw materials marketing, training etc.
based on the particular requirements of that district.
◦ Project Managers(3 members)
 Based on the needs in the area of the district
concerned they provide technical service. Their role
is to work for modernization and up gradation of
technology in small units.

SCHEMES UNDER DISTRICT
The following are the some of the schemes under District
Industries Centre (DIC):
1. Prime minister’s employment generation program
(PMEGP): The objective of this centrally sponsored
scheme of Ministry of Micro, Small & Medium
Enterprises, and Government of India being
implemented since October, 2008 is to provide gainful
self-employment opportunities to educated
unemployed one’s through industrial activities,
services and business.
2. Seed money scheme: The scheme focuses to
encourage an unemployed person to take up self-
employment ventures through industry, service and
business, by providing soft loans to meet part of the
margin money to avail institutional finance.

3. Dic loan scheme: The aim of the scheme is to
generate employment opportunities including self-
employment to small units located in towns and rural
areas with the population of less than 1 lakh and with
the investment on plant & machinery below 2 Lakhs.
Such identified micro units falling within the purview of
the Small Scale Industries Board and Village
Industries, handicrafts, handlooms, Silk & Coir
Industries are covered for financial assistance in the
form of margin/seed money under the Scheme.
4. Entrepreneurship development training program:
The objective of training educated unemployed
persons to take up self-employment ventures or skilled
wage employment. Entrepreneurs are given guidance
related to industry/service/business activities & skill up
gradation. Entrepreneurs are also guided in respect of
choice of activity, necessities of land, project report,
obtaining various no objection certificates, licenses
and marketing strategy.

5. District award schemes: To encourage
entrepreneurs in establishing small scale
enterprises and also to extols them for their
success and achievements, the State
Government has started honoring such
entrepreneurs with District Award Scheme at
the district level. Proprietors / Partner’s /
Directors of enterprises who have obtained
EM registration with the concerned District
Industries Centre at least three years earlier
and in production for two continuous years
are eligible for the award. These awards are
given to them under the scheme of this
District Award scheme.

6. PMRY Scheme: PMRY(Prime Minister
Rozgar Yojana) scheme was introduced
on the auspicious day of 2nd October,
1993, the birth Anniversary of Mahatma
Gandhi all over the country .The main
objective of the PMRY scheme was to
provide easy subsidized financial
assistance to educated unemployed
youth for starting their own businesses
in the fields like manufacturing,
business & service and trade sectors.

ROLE OF DIC FOR THE
PROMOTION OF SMALL
SCALE AND COTTAGE
INDUSTRIES DIC provides the information on sources of machinery and
equipment.
 Conducts multiple training programs to encourage the
entrepreneurs.
 Gives assistance to entrepreneurs under State Incentives scheme
and funding assistance through self employment schemes.
 It allots raw materials to the concerned industries at district level.
 DIC gives the information about marketing and its assistance on
participating trade fairs/buyers-sellers meet and so on.
 Guidance regarding Import and Exports of specific goods and
services.
 Improves the managerial capacity by organizing various seminars,
workshops etc.
 It clears the problems related to SSI Registration/Bank
loan/Marketing of production etc.
 Single window assistance District Industries Centers.
 Products standardization
 Promotion of products under Non-conventional Energy Sources.
 Design and product development for handicrafts.

SFC (State Finance
Corporation)
 The State Finance Corporations
(SFCs) are an integral part of
institutional finance structure of a
country. Where SFC promotes small
and medium industries of the states.
Besides, SFC help in ensuring
balanced regional development,
higher investment,
more employment generation and
broad ownership of various industries.

 At present in India, there are 18 state
finance corporations (out of which 17
SFCs were established under the SFC
Act 1951). Tamil Nadu Industrial
Investment Corporation Ltd. which is
established under the Company Act,
1949, is also working as state finance
corporation.

Objectives and Scopes:
 The main objectives of the S.F.C are
to provide financial assistance to
medium and small scale industries
which are outside the scope of
Industrial Financial Corporation of
India. The main function of S.F.C. is
limited within its states. It covers not
only public limited companies but also
private limited companies, partnership
firms and proprietary concerns.

Organization and Management
 A Board of ten directors manages
the State Finance Corporations. The State
Government appoints the managing director
generally in consultation with the RBI and
nominates the name of three other directors.
 All insurance companies, scheduled banks,
investment trusts, co-operative banks, and
other financial institutions elect three
directors.
 Thus, the state government and quasi-
government institutions nominate the majority
of the directors.

Functions of State Finance
Corporations
The various important functions of State
Finance Corporations are:
 The SFCs provides loans mainly for the
acquisition of fixed assets like land,
building, plant, and machinery.
 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).
 The SFCs underwrite new stocks,
shares, debentures etc., of industrial
units.

According to section 2(C) of the SFC Act 1951 as
amended in 1961, the SFC can assist an industrial
concern that is engaged in any of the following
activities:
 Manufacture, preservation or processing of goods
 Hotel Industries
 Road Transport
 Generation or distribution of electricity or any other form
of power
 Development of any area of land as industrial estate.
 Fishing or providing facilities for fishing or manufacture
of fish products.
 Providing special or technical knowledge or other
services for the promotion of industrial growth.

SIDBI – Small Industries
Development Bank of India
 The SIDBI (Small Industries
Development Bank of India) is a wholly
owned subsidiary of IDBI (Industrial
Development Bank of India), established
under the special Act of the Parliament
1988 which became operative from April
2, 1990.
 SIDBI is the Primary Financial Institution
for promoting, developing and
financing MSME (Micro, Small and
Medium Enterprise) sector.

 SIDBI helps MSMEs in acquiring the
funds they require to grow, market,
develop and commercialize their
technologies and innovative products.
The bank provides several schemes
and also offers financial services and
products for meeting the individual’s
requirement of various businesses.

Finance Facilities Offered by
SIDBI
Small Industries Development Bank of India, offers the following
facilities to its customers:
 Direct Finance
◦ SIDBI offers Working Capital Assistance, Term Loan Assistance,
Foreign Currency Loan, Support against Receivables, equity
support, Energy Saving scheme for the MSME sector, etc.
 Indirect Finance
◦ SIDBI offers indirect assistance by providing Refinance to PLIs
(Primary Lending Institutions), comprising of banks, State Level
Financial Institutions, etc. with an extensive branch network
across the country. The key objective of the refinancing scheme is
to raise the resource position of Primary Lending Institutions that
would ultimately enable the flow of credit to the MSME sector.
 Micro Finance
◦ Small Industries Development Bank of India offers microfinance
to small businessmen and entrepreneurs for establishing their
business.

Objectives of SIDBI
 To promote marketing of products of
small scale sector.
 To upgrade technology and also
undertaking modernization of small scale
units.
 To provide more financial assistance to
small scale ancillary and tiny sector.
 To encourage employment oriented
industries.
 To coordinate all the other institutions
involved in the promotion of small scale
industries.

The Entrepreneurship
Development Institute of India
(EDII)
 Registered under the societies
registration act 1860 & the public trust
act 1950, the EDII was set up in 1983.
Established as a collaboration
between Gujarat Govt. & the financial
institutions at the national level (like
SBI, IDBI bank, ICICI Ltd & IFCL Ltd).
It is committed to entrepreneurship
education, training and research.

EDI’s Mandate
 To augment supply of new, competent and
globally competitive entrepreneurs through
education, training & research
 To increase competitiveness of SMEs
 To contribute to the dispersal of business
ownership and thus expand social base of
entrepreneurial class
 To promote inter-firm cooperation and
collaboration to achieve competitive edge
through cluster, value chain and local area
development
 To contribute to creation & dissemination of
knowledge in entrepreneurial theory & practice
and undertake policy advocacy to create a
conducive environment wherein SMEs could
germinate and grow.

Focus
 Entrepreneurship Education
 Livelihood, Micro-enterprise & Micro-
finance Development
 Performance Improvement & Growth of
Existing Entrepreneurs
 ED Organisations and Support System
 Cluster and value chain development
 Social Entrepreneurship
 Women Entrepreneurship
 Research in Entrepreneurship Education
and Development

Khadi and Village Industries
Commission
 The Khadi and Village Industries
Commission (KVIC) is a statutory
body formed in April 1957 (as per an RTI) by
the Government of India, under the Act of
Parliament, 'Khadi and Village Industries
Commission Act of 1956'. It is an apex
organisation under the Ministry of Micro,
Small and Medium Enterprises, with regard
to Khadi and village industries within India,
which seeks to - "plan, promote, facilitate,
organise and assist in the establishment and
development of khadi and village industries in
the rural areas in coordination with other
agencies engaged in rural development
wherever necessary.

 The common characteristic found in both -
Khadi and Village Industries is that they
are labor intensive in nature. In the wake
of industrialization, and the mechanization of
almost all processes, Khadi and Village
industries are suited like no other to a labour
surplus country like India.
 Another advantage of Khadi and Village
Industries is that they require little or no
capital to set up, thereby making them an
economically viable option for the rural poor.
This is an important point with reference to
India in view of its stark income, regional and
rural/urban inequalities.

Objectives of KVIC
 To promote Khadi in rural areas
 To provide employment
 To produce saleable articles
 To create self-reliance amongst the
poor
 To build up strong rural community

Functions of KVIC:
 Building up of a reserve of raw materials and
implementation for supply to producers
 Formation of common service facilities for
processing of raw materials that include
semi-finished goods
 Promoting the sale and marketing of Khadi
and Village Industries products, as well as
handicrafts
 Promoting research in the village industries
sector related production techniques and
equipment
 Providing financial assistance to individuals
and institutions for the development and
operation of Khadi and Village industries

Schemes and Programs of the
Commission
 Prime Ministers Employment
Generation Program (PMEGP)
◦ The Prime Minister's Employment Generation
Programme (PMEGP) is the result of the
merger of two schemes - Prime Minister's
Rojgar Yojana (PMRY) and The Rural
Employment Generation Programme
(REGP).
 Interest Subsidy Eligibility
Certification Scheme (ISEC)
◦ The Interest Subsidy Eligibility Certificate
(ISEC) Scheme is the major source of
funding for the Khadi programme.

 Rebate Scheme
◦ The rebate on sales of Khadi and Khadi
products is made available by the
Government so as to make the price of Khadi
and Khadi products competitive with other
textiles. Normal rebate (10 per cent) all
through the year and an additional special
rebate (10 per cent) for 108 days in a year, is
given to the customers.
◦ The rebate is allowed only on the sales made
by the institutions/centers run by the
Commission/State Boards and also at the
sales centers run by the registered
institutions which are engaged in the
production of Khadi and polyvastra.

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