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Meaning and Nature of Small Business

In our country traditional and modern practice exist in small industries which are divided into eight various groups viz., handicraft, coir, handloom, khadi, sericulture, power looms, village industries and small industries. The power loom industry and small scale industry come under modern small industries whereas the rest come under traditional practice. Village and small industries give the maximum employment opportunity in India. Before we try to understand the concept nature or meaning of this small business we should know how the size of business is defined. Different parameters are used to measure the size of business these include the number of employees, capital invested for that business, the volume and value of output delivered and the power consumption for business activities. All these parameters come with limitations and depending on the requirements the measures can vary. In India the small scale industries are defined by the Investment in Plant and machinery, keeping in mind the socio-economic environment in India were the capital resource is scarce and labour availability is abundant. The other important point to be noted is that this definition exists only for small scale industries and units and not for large or medium industries. On the basis of capital Invested small business in India fall under these categories:
  1. Small Scale Industry: These small scale industry undertakings have a fixed amount as investment where in the investment on fixed assets of plant and machinery should not exceed Rupees one crore. However to promote export and modernize such small industry the investment ceiling in plant and machinery is five crores.
  2. Ancillary Small Industrial Unit: A small scale industry becomes an ancillary industry to another industry by supplying a minimum of 50 percent of its production to the other industry which is referred as parent unit. The ancillary small unit manufactures components, parts, tools, some assembling and intermediate products for the parent unit. These units apart from catering to the parent industry can also do their own business. These ancillary units have an advantage of definite demand through parent units. The parent unit generally gives financial assistance and technical guidance to these ancillary units.
  3. Export Oriented Units: A small scale industry can enjoy status of export oriented business unit by exporting more than 50 percent of its production. The incentives offered by the government like export subsidies and other concessions are applicable to such export units.
  4. Small Scale Industries Owned and Managed by Women Entrepreneur: An enterprise individually or jointly having share capital of not less than 51 percent which is run by a women entrepreneur in a small scale industry. These industries are given special concession by the government like low rate of interest for loans special schemes etc, as these units are managed by women.
  5. Tiny Industrial Units: An industry in which the investment in plant and machinery is not more than 25 lakhs is defined as tiny unit.
  6. Small Scale Service and Business (industry related) Enterprise: An industry were the investment in fixed assets of plant and machinery excluding the land and building does not exceed 10 lakhs are small scale service and business industry.
  7. Micro Business Enterprises: Those whose investment does not exceed one lakh are called micro business enterprise.
  8. Village Industries: Industries in rural areas producing any kind of goods and rendering service with or without power where the fixed capital investment per head or worker does not exceed Rs.50000 or any other sum amount fixed by the central government from time to time are called village industries.
  9. Cottage Industries: These are also known as Traditional Industry. The criteria here for small scale industry is not defined by capital investment. However these cottage industries have certain characteristics which are as follows:
  • Cottage industries are organized through private resources
  • Local talents and families are used as labours
  • Simple equipments are used in this industry
  • The investment amount is very small
  • Simple products are produced in their own premises
  • Indigenous technology used in production​

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