Class 11 NCERT Solutions: Chapter 9 MSME and Business Entrepreneurship Exercise 9.2 (Business Studies)

Exercise 9.2

Long Answer Questions

Question 1: How do small-scale industries contribute to the socio-economic development of India? Discuss.

Answer: Small-scale industries (SSIs) have been playing a significant role in the socio-economic development of India for several decades. They have been recognised as important vehicles for job creation, income generation, poverty alleviation, and regional development. The small-scale industries contribute to the socio-economic development of India in the following ways:

1. Employment Generation: SSIs are the major employment providers in the country, particularly in rural areas. They employ a large number of people with diverse skills and education levels, creating jobs for both skilled and unskilled workers. These industries also provide opportunities for self-employment and entrepreneurship, particularly for women and marginalised sections of society.

2. Income Generation: SSIs help in generating income for the local population, leading to an improvement in their standard of living. They provide a source of income for small-scale entrepreneurs, artisans, craftsmen, and workers who can earn their livelihoods through these industries.

3. Balanced Regional Development: SSIs contribute to the development of backward and rural areas, leading to balanced regional development. They help in decentralising industrial activity, reducing regional disparities, and promoting growth in backward regions. This leads to the creation of new markets, higher levels of economic activity, and better access to employment and economic opportunities for local populations.

4. Export Promotion: SSIs have been playing an important role in promoting exports of manufactured goods from India, especially the export of traditional and handicraft products, which are in high demand in the global market. These industries contribute to foreign exchange earnings and promote India’s image as a source of high-quality handicrafts and other products.

5. Innovation and Entrepreneurship: SSIs are a hotbed of innovation and entrepreneurship. They provide opportunities for small entrepreneurs to experiment and innovate, leading to the development of new products, processes, and technologies. This contributes to the overall growth and competitiveness of the Indian economy.

In conclusion, small-scale industries play a crucial role in the socio-economic development of India. They contribute to employment generation, income generation, balanced regional development, export promotion, and innovation and entrepreneurship. The government has been providing various policy measures to support the growth of these industries, including financial assistance, technical support, and marketing assistance. The continued growth and development of SSIs are critical for the overall economic development of India.

Question 2: Describe the role of small businesses in rural India.

Answer: Small businesses play a crucial role in the development of rural India. These businesses, also known as Micro, Small and Medium Enterprises (MSMEs), contribute significantly to job creation, income generation, and poverty alleviation in rural areas.

The role of small businesses in Rural India can be explained through the following points:

1. Employment Generation: Small businesses in rural India are the major employment providers, particularly for the unskilled and semi-skilled workforce. They provide a source of livelihood for the local population, creating jobs for both men and women. This leads to a reduction in rural-urban migration and a boost in the local economy.

2. Income Generation: Small businesses generate income for the local population, leading to an improvement in their standard of living. They provide a source of income for small-scale entrepreneurs, artisans, craftsmen, and workers who can earn their livelihoods through these businesses. This also leads to an increase in the purchasing power of the local population, leading to the growth of local markets.

3. Rural Development: Small businesses contribute to the development of rural areas, leading to balanced regional development. They help in decentralising industrial activity, reducing regional disparities, and promoting growth in backward regions. This leads to the creation of new markets, higher levels of economic activity, and better access to employment and economic opportunities for local populations.

4. Innovation and Entrepreneurship: Small businesses in rural India are a hotbed of innovation and entrepreneurship. They provide opportunities for small entrepreneurs to experiment and innovate, leading to the development of new products, processes, and technologies. This contributes to the overall growth and competitiveness of the Indian economy.

5. Export Promotion: Small businesses in rural India also contribute to the promotion of exports of manufactured goods from the country, especially the export of traditional and handicraft products, which are in high demand in the global market. This leads to the creation of employment opportunities, foreign exchange earnings, and the promotion of India’s image as a source of high-quality handicrafts and other products.

The government has been taking various policy measures to support the growth of small businesses in rural India, including financial assistance, technical support, and marketing assistance. The continued growth and development of small businesses are critical for the overall economic development of rural India. In conclusion, small businesses in rural India play a crucial role in the socioeconomic development of the country. They contribute to employment generation, income generation, rural development, innovation and entrepreneurship, and export promotion. Therefore, the government should continue to provide support and assistance to these businesses to ensure their sustained growth and development.

Question 3: Discuss the problems faced by small-scale industries

Answer: Small-scale industries or SSIs face a number of problems that hinder their growth and development. These problems are diverse and range from financial constraints to regulatory issues. Some of the major problems faced by small scale industries in India are as follows:

1. Finance: One of the major problems for SSIs is the arrangement of funds required for the business. They don’t have enough creditworthiness for taking funds from the capital market, so they heavily rely on local financial resources that charge them heavy interest.

2. Raw Materials: Being relatively small, SSIs can’t buy raw materials in bulk as they don’t have a production unit of a big scale. Also, due to the small number of purchases, their bargaining power becomes relatively low. Often, sellers take large orders and in the situation of scarcity, small business suffers the most as they don’t get the raw materials.

3. Managerial Skills: The owners of the SSIs are generally single people, who may not have the managerial skills required to run a business.

4. Labour: Due to the low level of salary, employees are less willing to work hard and produce more. It can’t afford to pay high salaries and due to this reason, they fail to hire talented people.

5. Marketing: Marketing of the products is the most prominent activity as it holds the responsibility to generate revenue. In most cases, marketing is the weaker area of SSIs as they lack the amount of money and infrastructure required for marketing.

6. Quality: SSIs mainly focus on cutting costs and keeping prices low. It doesn’t concentrate on meeting quality standards which lead to dissatisfaction among consumers about the company and the product.

7. Capacity Utilisation: SSIs fail to operate at full capacity due to a lack of marketing or lack of demand. It increases their operating cost and leads to sickness.

8. Technology: The use of outdated technology is often a reason why SSIs fail to do well in the market. It leads to low productivity and uneconomical production.

9. Sickness: Due to some internal and external reasons, SSIs are gradually turning out to be sick. Lack of skilled labour, low salary, shortage of funds, etc. leads to sickness in the industry.

10. Global Competition: Competitors of SSIs are not only from the local or national market but from the global market. It often becomes very difficult for small businesses with outdated technology and a lack of marketing to compete with big giants.

In conclusion, small-scale industries face a number of challenges that hinder their growth and development. These challenges include Finance, Raw Materials, Managerial Skills, Labour, Marketing, Quality, Capacity Utilisation, Technology, Sickness, and Global Competition. The government has taken several measures to support the growth of SSIs, including financial assistance, technical support, and marketing assistance. However, more needs to be done to address the challenges faced by SSIs and promote their sustained growth and development.

Question 4: What measures has the government taken to solve the problem of finance and marketing in the small-scale sector?

Answer: The government of India has taken a number of measures to address the financial and marketing challenges faced by the small-scale sector. These measures are aimed at improving access to finance and markets for small-scale industries, promoting their growth and development. The major measures taken by the government in this regard are as follows:

1. National Bank for Agriculture and Rural Development (NABARD): NABARD was set up in 1982 for the promotion of integrated rural development. Besides agriculture, NABARD also supports small-scale industries, rural artisans, and cottage and village industries. It provides credit to them and offers them consulting and counselling services. Besides, NABARD also helps in organising training and development programmes for rural entrepreneurs.

2. Rural Small Business Development Centre (RSBDC): RSBDC is sponsored by NABARD and is set up by the world association for small and medium enterprises. RSBDC provides the current and prospective micro and small entrepreneurs of rural areas with management and technical support.

3. National Small Industries Corporation (NSIC): NSIC was set up in 1955 for promoting, aiding, and fostering the growth of small-scale businesses in the country. The main work of NSIC involves the promotion of the use of indigenously available raw materials. It also helps small-scale businesses, export their products and work on the development of export worthiness of their products. Besides, NSIC provides small businesses with technology development and mentoring services for their growth.

4. Small Industries Development Bank of India (SIDBI): SIDBI was set up with the aim of providing direct and indirect financial assistance to small-scale businesses under various schemes. It basically focuses on the credit and finance requirements of small businesses.

5. National Commission for Enterprises in the Unorganised Sector (NCEUS): NCEUS was constituted in 2004, and its objective is to improve efficiency and enhance the global competitiveness of small-scale industries. NCEUS particularly focuses on the problems faced by the unorganised or informal sector.

6. World Association for Small and Medium Enterprises (WASME): WASME is an international non-governmental organisation, based in India and addresses the problems of small and medium-scale businesses. This organisation has set up an International Committee for Rural Industrialisation, which aims at designing a model for the growth and development of rural industries. 

7. Scheme of Fund for Regeneration of Traditional Industries (SFURTI): SFURTI was set up by the Central Government with the aim of making traditional industries more productive and competitive, and also facilitating their sustainable development. The main objectives of this fund include developing clusters of traditional industries in different parts of India, developing market intelligence, improving technology, building innovative and traditional skills, etc.

Question 5: Innovation is integral to MSME’. Discuss giving reasons to your answer. 

Answer: Innovation is indeed integral to MSMEs (Micro, Small, and Medium Enterprises) for a number of reasons, such as:

1. Competitive Advantage: MSMEs operate in a highly competitive environment, and innovation is critical for gaining a competitive advantage. By developing new products, processes, or services, MSMEs can differentiate themselves from their competitors, attract new customers, and retain existing ones.

2. Cost Reduction: Innovation can help MSMEs to reduce their costs by developing more efficient processes or using new materials that are cheaper and more readily available. By reducing their costs, MSMEs can offer their products or services at more competitive prices and increase their profit margins.

3. Increased Efficiency: Innovation can also help MSMEs to become more efficient in their operations. For example, by automating certain tasks or using software to manage their inventory, MSMEs can save time and reduce errors, which can lead to higher productivity and profitability.

4. Improved Customer Satisfaction: MSMEs that innovate and develop new products or services meeting the needs of their customers can improve customer satisfaction and loyalty. By listening to their customers and developing products that meet their needs, MSMEs can build long-term relationships with their customers and increase their revenue streams.

5. Adaptability to Changing Market: Innovation also enables MSMEs to adapt to changing market conditions. For example, if there is a shift in consumer preferences, MSMEs that have a culture of innovation can quickly develop and launch new products that meet the changing demand. This can help them stay relevant and competitive in the market.

In conclusion, innovation is integral to the success of MSMEs. It allows them to gain a competitive advantage, reduce costs, increase efficiency, improve customer satisfaction, and adapt to changing market conditions. Therefore, it is important for MSMEs to foster a culture of innovation and invest in research and development to stay ahead of the competition.

Question 6: ‘Creativity and Innovation is the key to MSME’. Justify the statement. 

Answer: The statement ‘Creativity and innovation is the key to MSMEs’ is justified because creativity and innovation are essential for the growth and success of MSMEs. Here are a few reasons why:

1. Differentiation: In today’s highly competitive business environment, it is critical for MSMEs to differentiate themselves from their competitors. Creativity and innovation can help them develop unique products or services that stand out in the market.

2. Adaptability: MSMEs need to be able to adapt to changing market conditions, and creativity and innovation are key to achieving this. By constantly innovating, MSMEs can develop products or services that meet the changing needs and preferences of their customers.

3. Cost Saving: Creativity and innovation can also help MSMEs to save costs by developing more efficient processes, using new materials or technologies, and reducing waste. This can lead to higher profitability and a competitive edge in the market.

4. Customer Satisfaction: MSMEs that are creative and innovative can develop products or services that better meet the needs and desires of their customers. By providing a better customer experience, MSMEs can increase customer satisfaction, loyalty, and repeat business.

5. Growth Opportunities: Creativity and innovation can also create new growth opportunities for MSMEs. By developing new products or services, MSMEs can expand into new markets, increase their revenue streams, and grow their business.

In conclusion, creativity and innovation are indeed the keys to the success of MSMEs. They enable MSMEs to differentiate themselves, adapt to changing market conditions, save costs, increase customer satisfaction, and create growth opportunities. Therefore, MSMEs should prioritize creativity and innovation in their business strategies and invest in research and development to stay ahead of the competition.