Small business plays a sign role in industrialised as well as industrialising countries. In industrialised countries it includes small scale manufacturing as well as business establishments. In industrialising countries like India, small business is indentified with, what is commonly known as, small scale industry
Small business attracts the attention of Policy Makers for exclusive promotion all over the world, particularly in industrialising countries because it bestows on an economy several benefits. A small business enterprise
– is relatively labour intensive and this has implications for equity
– is flexible
– has short-gestation period
– absorbs skilled as well as unskilled labour
– requires less capital to start a unit
– facilitates decentralised industrialisation
– promotes entrepreneurship
– enables technological experiments and innovations.
These features of small business have prompted both industrialised and industrialising countries to formulate exclusive programmes for small industry promotion. In general, the promotional thrust on small business comprises the following:
1. Exclusive laws to define and promote small business
2. Separate apex administrative machinery with regional and sub-regional centres
3. Industrial extension and advisory services
4. Technical services and inputs
5. Financial institutions
6. Fiscal incentives
7. Entrepreneurship development institutes
8. Marketing networks
9. Industrial estates, etc.
Though these relative emphasis varies from one of small business development strategy across the
country to another. While industrialised countries
Though these form the broad contents the encourage competitive growth of small business, in developing countries emphasis is laid on its quantitative growth in a protective environment. Among the developing countries, India has a unique place in small business promotion because of its longstanding and comprehensive policies and programmes to protect and promote small business.
SMALL BUSINESS DEFINITION
A small business/industry unit can be defined in terms of number of workers employed or amount of investment in plant and machinery or both or in terms of sales. Industrialised countries like Germany and Italy do not have any official definition for small business industry. China, Sri Lanka and Nepal define small industry in terms of only investment. Japan and Bangladesh define small industry in terms of both employment and investment, In Mexico, it is defined in terms of employment and sales. Malaysia, South Korea and United Stat define a small enterprise in terms of only employment
In India, small business sector is nothing but SSI Sector and a unit is defined in terms of investment in plant and machinery. The SSI sector, as of now, covers a wide range of enterprises with diverse characteristics
1. Small Scale Industrial Undertakings
2. Ancillary Industrial Undertakings
3. Tiny Enterprises
In addition, they also cover Small Scale Service/Business Enterprises (SSSBEs) and Women Enterprises.
Initially, a small industry unit and an ancillary unit were defined both in terms of employment and gross fixed capital. In 1960, the employment criterion was dropped on the ground that it acts as a disincentive for small industry to generate employment and discriminates against labour-intensive industries. Since then, definition of small industry has been confined to investment alone. In 1960. the criterion was also changed from gross fixed capital to investment inplant and machinery. However, the investment limit on plant and machinery has been increased, from time to time, on two counts: To compensate for the rise in the prices of capital equipments due inflation, and To facilitate modernisation. in 1977, the concept of tiny unit was introduced and was defined in terms of investment (in plant and machinery up to Rs. 1.00 lakh. The investment limit was enhanced to Rs. 2.00 lakh in 1980, Rs 500lakh in 199 and Rs 25 00 lakh in 1997. The investment limit also applies Small Scale ServicelBusiness Enterprise (SSSBE).
A small industry unit is currently defined in terms of investment in plant and machinery not exceeding Rs. 300 crore. An y unit is defined as one which caters not more than 50 percent of its production or services to one or more other industrial undertakings and whose investment in plant and machinery does not exceed Rs. 3.00 crore. if in any of the small scale / ancillary / tiny SSSBE unit, one or more women entrepreneurs have more than 51 percent financial holding, it will be known as a women enterprise,