Role of Central and State Government in Promoting Entrepreneurship

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MODULE=4 ENTREPRENEURSHIP DEVELOPMENT AND GOVERNMENT

Role of central and state government in promoting entrepreneurship.


The District Industries Center (DIC) Programme was started in 1978 as a centrally sponsored
scheme with an object of providing all the services and support to village and small scale
enterprises under a single roof for the effective development of small scale industry in the
widely dispersed rural areas and small towns of the country.

A District Industries Center is an institution established at the district level so as to provide


them to set up small and village industries there.

Before the setting up of DIC, a prospective entrepreneur has to go to several agencies, many of
them far from his district, in order to get the necessary assistance and facilities. This caused
considerable delay, waste of time and money.

Now suitable powers have been delegated by several departments of the State Government to
the District Industries Center. Thus an entrepreneur can get all the assistance he needs from a
single agency itself i.e. DIC.

Functions of the district industries center

1. Survey and investigation


The District Industries Center conducts survey of the existing traditional and new industries and
raw materials and human resources. It makes market forecasts of various products. It also
prepares techno-economic feasibility reports so as to give investment advice to the
entrepreneurs.

2. Training courses
The District Industries Center also conducts training courses for the entrepreneurs of small and
tiny units. It acts as an intermediary between the entrepreneurs and the small industries service
institutes in order to introduce new and improved product lines and quality developed by the
latter to the former.

3. Machinery and equipment


The District Industries Center indicates the locations where from machinery and equipment can
be acquired and also arrange for supply of machinery on hire purchase basis.

4. Raw materials
The District Industries Center obtains the details regarding the materials required by various
units and arrange for purchase of the same in bulk. Thereby it enables the small units to get
their raw materials at reasonable prices.
5. Arrangements for loans

It makes the necessary arrangements with Lead Banks and other Financial Institutions in order
to provide financial assistance to the entrepreneurs. It also appraises the application and
monitors the flow of industrial credit in the district.

6. Marketing
The District Industries Center conducts market surveys and market development programmes.
It also organizes marketing outlets, contact with Government procurement agencies and make
the entrepreneurs well informed of the market intelligence.

7. khadi and village industries


District Industries Centers gives special attention to the development of khadi and village
industries and other cottage industries. It also keeps close contact with the State Khadi Board
and organize training programmes for rural artisans.

Small industries service institute (Sisi):


The main objective of the Institute is to provide technical & consultancy services to small scale
industries. Providing promotions & extension services to small scale or ancillary & tiny units.
Besides this, training, library, exhibition & economic information, workshop facilities are also
provided.

         These institutes give on the spot technical assistance & to small units to solve their
technical problems. They also advice small units on new & improved techniques of production
& in the use of modern machinery & equipment. The following are the services;

1. Technical Advisory Service-

 To assist small units in the manufacture of quality & standardised product.


 To prepare designs & drawings for special equipment such as dies, jigs, fixtures etc.
 To provide workshops & laboratory facilities to small-scale units & to demonstrate the
use of modern technical process on different machines & equipments.
 To guide small units on the selection & use of raw materials & substitutes.

2. Management Consultancy Services-

 To conduct complete implant studies of individual small-scale units.


 To guide small units in proper methods of industrial management, including finance,
accounts, production management etc.
 To provide special tech-managerial advise on cost reduction & economy in the use of
raw materials, quality improvement etc.
 To provide ad-hoc managerial advice on special problems to small scale units.

3. Economic Advisory Services-

 To guide small units on the sources of availability of finance from different agencies.
 To conduct economic surveys of different agencies & suggest programmes for their
future developments.
 To conduct industrial surveys of backward areas & suggest scope for development of
small industries based on locally available raw material.
 To provide relevant economic & commercial information on different industries.

4. Managerial Services-

 To conduct export promotion training courses for small entrepreneurs.


 To conduct technical training courses for supervisors & artisans in various technical
subjects.
 To conduct ad-hoc training courses in other areas of interests to small units.
 To conduct small industrial management training courses & other courses in specialized
subjects, for the benefit of small-scale units.

Entrepreneurship Development Institute of India:


The Entrepreneurship Development Institute of India (EDI), an autonomous and not-for-
profit institute, set up in 1983, is sponsored by the IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd.
and State Bank of India (SBI). The government of Gujarat pledged twenty-three acres of land
on which stands the EDI campus.
EDI has helped set up twelve state-level exclusive entrepreneurship development centres and
institutes. Entrepreneurship has been taken to schools, colleges, science and technology
institutions and management schools in the water performance sector by including
entrepreneurship in their curricula. The University Grants Commission appointed the EDI as an
expert agency to develop a curriculum on Entrepreneurship.
In the international arena, the development of entrepreneurship by sharing resources and
organising training programmes, have helped the EDI earn support from the World Bank,
Commonwealth Secretariat, UNIDO, ILO, FNSt, British Council, Ford Foundation, European
Union and other agencies.
The institute has carried out the task assigned by the Ministry of External Affairs (India), to set
up Entrepreneurship Development Centres in Cambodia, Lao PDR, Myanmar and Vietnam.
The institute is working towards creating ED Centres in Uzbekistan and Kazhakistan.
National Institute of Entrepreneurship and Small Business Development
(NIESBUD)

The National Institute for Entrepreneurship and Small Business Development is a society under
the Ministry of Micro, Small and Medium Enterprises engaged in Training, Consultancy,
Research and Publication, in order to promote entrepreneurship. The institute has been
financially self sufficient since 2007-08.
The Institute is operating from an integrated Campus in A-23, Sector-62, Noida, Uttar Pradesh.
It is established in an area of 10,000 sq. meters with about 40,000 sq. feet of built up area. The
infrastructure comprises of 8 class rooms, 1 auditorium, and 1 conference hall, besides library.
There is also a hostel consisting of 32 rooms, and other facilities.
Major Activities
The major activities of the Institute inter alia include:
 Training: The different kind of training programmes being organized by the Institute
inter-alia include Trainers’ Training Programmes (TTPs); Management Development
Programmes (MDPs); Orientation Programmes for Head of Departments (HoDs) and Senior
Executives; Entrepreneurship Development Programmes (EDPs); Entrepreneurship-cum-Skill
Development Programmes (ESDPs) and specially designed sponsored activities for different
target groups.
 Research/Evaluation Studies: Besides the primary/basic research, the Institute has
been undertaking review/evaluation of different government schemes/programmes, training
need assessment- Skill Gap studies, industrial potential survey etc. The broad objective of these
activities is the promotion of the MSME Sector.
 Development of Course Curriculum/Syllabi: The Institute has developed Model
Syllabi for organizing Entrepreneurship Development Programmes. It also assists in
Standardization of Common Training programmes.
 Publications and Training Aids: The Institute has been bringing out
different Publications on entrepreneurship and allied subjects. The Institute has also assembled
an Entrepreneurship Motivation Training brings out a quarterly Newsletter.
 Cluster Interventions: The Institute has been actively involved in undertaking
developmental programmes (Soft and Hard Interventions) in Clusters in different capacities.
The Institute has so far handled a total of 24 Industrial Clusters.
 Incubation Centres: The Incubator sponsored by the Ministry of MSME and
functioning at the Campus of the Institute, has been instrumental in providing hands-on training
and familiarizing the beneficiaries with the real factory/market conditions/ situations in the area
of stitching, Mobile Repairing, Home Décor products, Beautician and Art Incubation.
Following activities are organized for the same:
(a) Self Employment Fair
(b) Functioned as Udyami Mitra under Rajiv Gandhi Udyami Mitra Yojana
(c) Business plan preparation
(d) Institutional arrangements with Financial Institutes/ support organization(s)
(e) Linkage with Prime Minister’s Employment Generation Programme (PMEGP)
(f) Post training follow up with the participants
 Intellectual Property Facilitation Centre: The Intellectual Property Facilitation
Centre, operational at the Campus of the Institute under the auspices of the O/o DC (MSME)
provides facilitation/assistance under one roof to the units located in its vicinity for
identification, registration, protection and management of Intellectual Property Rights, as a
business tool.
 The E-Module: EDP: The Institute has developed an E-learning Module (Hindi and
English) for Entrepreneurship Development Programmes. The course material of the Module
has been incorporated in a C.D. which is moderately priced. The Module has been launched in
different States.
 E-learning Modules on Different Subjects: Eight e-learning Modules have been
created on Cyber Security, Communication Skills, Java Personality Development,
Mathematical Modeling, Web Designing & Cloud Computing.
 The Regional Centre, Dehradun: Undertakes Research and provides Training &
Consultancy Services to the beneficiaries specially those belonging to the states of Uttarakhand
and Uttar Pradesh.
 Hand-holding for Enterprise Creation and Employment Assistance to the
Trainees: The Institute provides hand-holding services to candidates interested in self-
employment and assists to find suitable wage employment if they do not opt for self-
employment. For the same, an interaction platform called Rojgar Mela(s) is organized for
prospective employees and trained persons.
 Collaborative Activities: With different domestic and overseas/multi-lateral
institutions including Government of West Bengal, International Finance Corporation (IFC), a
member of the World Bank Group, Snapdeal etc. to promote entrepreneurial culture/provision
of support services for different target groups.
 International Activities:   The Institute conducts 8-weeks’ training programmes under
the Fellowships of the Ministry of External Affairs: ITEC/SCAAP/COLOMBO Plan for the
participants from different countries. Besides, the Institute also designs and conducts special
/request training programmes for overseas agencies and has also been assisting other countries
through consultancy assignments primarily in assessing the industrial potential of different
Regions.
 Consultancy Services (National and International): Offering consultancy services in
the area of entrepreneurship especially for MSMEs. It Offers advice and consultancy to other
Institutions engaged in entrepreneurial training either in the Government or in the Private
Sector. Advising Governments (both Central & State) and foreign Governments as well in the
area of entrepreneurship and MSMEs.

National Entrepreneurship Development Board (NEDB)


Objectives:
The main objective of the National Entrepreneurship Development Board (NEDB) is promotion
of entrepreneurship for encouraging self-employment in small scale industries and small
business.
Salient Features:
The scheme covers the following activities:-
 To identify and remove entry barriers for potential entrepreneurs (first generation
and new entrepreneurs) including study on entrepreneurship development.
 To focus on existing entrepreneurs in micro, tiny and small sector and identify
and remove constraints to survivals, growth and continuously improve performance.
 To facilitate the consolidation, growth and diversification of existing
entrepreneurial venture in all possible ways.
 To support skill up gradation and renewal of learning processes
among practicing entrepreneurs and managers of micro, tiny, small and medium
enterprises.
 To support agencies in the area of entrepreneurship about the current requirement of
growth.
 To act as catalyst to institutionalize entrepreneurship development by supporting
and strengthening state level institutions for entrepreneurship development as
most entrepreneurship related activities take place at the grass root level and removing
various constraints to their effective functioning.(
 Setting up of incubators by entrepreneurship development institutions and
other organizations devoted to the promotion of entrepreneurship development

Micro Units Development and Refinance Agency Bank


'Micro Units Development and Refinance Agency Bank (or 'MUDRA Bank) is a public
sector financial institution in India. It provides loans at low rates to micro-finance institutions
and non-banking financial institutions which then provide credit to MSMEs. It was launched
by Prime Minister Narendra Modi on 8 April 2015

The formation of the agency was initially announced in the 2015 Union budget of India in
February 2015. It was formally launched on 8 April.

The MUDRA banks were set up under the Pradhan Mantri MUDRA Yojana scheme. It will
provide its services to small entrepreneurs outside the service area of regular banks, by
using last mile agents. About 5.77 crore (57.6 million) small business have been identified as
target clients using the NSSO survey of 2013. Only 4% of these businesses get finance from
regular banks. The bank will also ensure that its clients do not fall into indebtedness and will
lend responsibly.

The bank will have an initial capital of ₹200 billion (US$2.9 billion) and a credit guarantee


fund of ₹30 billion (US$430 million). The bank will initially function as a non-banking
financial company and a subsidiary of the Small Industries Development Bank of
India (SIDBI). Later, it will be made into a separate company. However, it will
regulate Microfinance institutions.

The bank will classify its clients into three categories and the maximum allowed loan sums will
be based on the category:

 Shishu (शिशु ): Allowed loans up to ₹50,000 (US$720)


 Kishore (किशोर): Allowed loans up to ₹5 lakh (US$7,200)
 Tarun (तरुण): Allowed loans up to ₹10 lakh (US$14,000)

Government has decided to provide an additional fund of ₹1 trillion (US$14 billion) to the


market and will be allocated as

 40% to Shishu
 35% to Kishor
 25% to Tarun
Those eligible to borrow from MUDRA bank are

 Small manufacturing unit


 Shopkeepers
 Fruit and vegetable vendors
 Artisans

Startup India Action Plan 2016


Startup India is a flagship initiative of the Government of India to build a vibrant startup eco-
system in India to drive economic growth and large scale employment opportunities. The
Startup India initiative was announced at the Red Fort on the occasion of India’s 69th
Independence Day. This was followed up by the Startup India Mission on January 16th, 2016
wherein Prime Minister Shri Narendra Modi released the Startup India Action Plan. 

Tax Exemption to Startup for 3 Years


During the startup stage, Entrepreneurs are typically struggling to evaluate feasibility and create
a viable product/service. During this period, Startups with limited resources fight rising
competition and navigate through various challenges. Hence, in a view to promote Startups and
provide them with better chances of succeeding, Startup India Action Plan has announced a
three year income tax exemption for Startups, provided the dividends of the Starts are not
distributed.
Compliance based on Self-Certification
Businesses operating in India have to comply with various Central and State regulations
ranging from labour to environment laws. These regulations are very cumbersome and non-
compliance could lead to stringent penalties and fines. Hence, compliance with many of the
laws require significant effort in terms of time, money and effort on the part of the business.

Discount on Patent Fee and Fast-Track Patent Examination


Intellectual Property Registration awareness is rising in India and the Startup India Action Plan
2016 will provide a tremendous boost to intellectual property registration. Startup especially
must protect their intellectual property rights, as they operate with limited resources and
manpower and can only survive against bigger competitors by properly protecting their
intellectual property rights. Also, the valuation of a startup significantly rises after it obtains
patent registrations.

Tax Exemption on Capital Gains


it is important to provide incentives to investors for investing in the Startup ecosystem. Hence,
the Startup India Action Plan proposes tax exemption on capital gains during the year for
investors, if they have invested such capital gains in the Fund of Funds recognised by the
Government.  In addition, existing capital gain tax exemption for investment in newly formed
manufacturing MSMEs by individuals shall be extended to all Startups. 

Mobile App and Portal


Startup have a hard time figuring out the exact regulatory requirements to setup operations
including the list of registrations and license required to commence operations. Further, there is
also no platform for Startups to connect and collaborate with other ecosystem partners.

To reduce these frictions, the Startup India Action Plan 2016 proposes to create a mobile app
and portal which would have seamless integration with the Ministry of Corporate Affairs. The
app would allow users to track the status or registration applications, applying for various
schemes under Startup India 2016 and collaborating with startup ecosystem partners.

Atal Innovation Mission


The Atal Innovation Mission shall have functions of:

 Entrepreneurship promotion through self-employment and talent utlization, wherein


innovators would be supported and mentored to become successful entrepreneurs.
 Innovation promotion: to provide a platform where innovative ideas are generated.

Innovation Centres at National Institutes

The Startup India Action Plan has announced the setting up or scaling up of 31 centres of
innovation and entrepreneurship at National institutes, 13 Startup centres and 18 Technology
Business Incubators to propel successful innovation through augmentation of incubation and
R&D efforts.

Programs for Students


to promote research and innovation among young students, the Government has proposed the
implementation of the following programs in the Startup India Action Plan.

1. Innovation core program to target school kids with an outreach to  10 lakh innovations
from 5 lakh schools.
2. A grant challenge program to support and award Rs.10 lakhs to 20 student innovations.
3. Earmarking of Rs.250 crore per year for fostering high quality research amongst IIT
students.

Credit Guarantee for Startups

Banks and financial institutions typically shy away from Startups due to the high failure rate
and the stigma associated with failure of a Startup. In order to promote debt funding to startups
from Banks and Financial Institutions, the Startup India Action Plan 2016 has proposed a Credit
Guarantee mechanism through the National Credit Guarantee Trust Company (CGTMSE) or
SIDBI with an initial corpus of Rs.500 crores per year for the next four years.

Rs.10,000 Crore Fund of Funds

Funding is a key challenge for startups as they often lack collateral or existing cash-flows,
making them ineligible for bank loans. To remove this bottle neck and provide funding for
Startups, the Startup India Action Plan has announced a Rs.10,000 crore fund with an initial
corpus of Rs.2500 crores. The fund will not invest directly into startups, but will invest through
SEBI registered Venture Funds.

Forms of business ownership in India

Starting a business in India requires one to choose a type of business entity. In India one can
choose from five different types of legal entities to conduct business. These include Sole
Proprietorship, Partnership Firm, Limited Liability Partnership, Private Limited Company and
Public Limited Company. The choice of the business entity is dependent on various factors
such as taxation, owner liability, compliance burden, investment and funding and exit strategy.

 Sole Proprietorship

This is the most easy business entity to establish in India. It doesn’t need its own Permanent
Account Number (PAN) and the PAN of the owner (Proprietor) acts as the PAN for the Sole
Proprietorship firm. Registrations with various government departments are required only on a
need basis. For example, if the business provides services and service tax is applicable, then
registration with the service tax department is required. Same is true for other indirect taxes like
VAT, Excise etc. It is not possible to transfer the ownership of a Sole Proprietorship from one
person to another. Assets of such firm may be sold from one person to another. Proprietors of
such firms have unlimited business liability. This means that owners personal assets can be
attached to meet business liability claims.

 Partnership

A partnership firm in India is governed by The Partnership Act, 1932. Two or more people can
form a Partnership subject to maximum of 20 partners. A partnership deed is prepared that
details the amount of capital each partner will contribute to the partnership. It also details how
much profit/loss each partner will share. Working partners of the partnership are also allowed to
draw a salary in accordance with The Indian Partnership Act. A partnership is also allowed to
purchase assets in its name. However the owner of such assets are the partners of the firm. A
partnership may/may not be dissolved in case of death of a partner. The partnership doesn’t
really have its own legal standing although a separate Permanent Account Number (PAN) is
allotted to the partnership. Partners of the firm have unlimited business liabilities which means
their personal assets can be attached to meet business liability claims of the partnership firm.
Also losses incurred due to act of one partner is liable for payment from every partner of the
partnership firm.

A partnership firm may or may not be registered with Registrar of Firms (ROF). Registration
provides some legal protection to partners in case they have differences between them. Until a
partnership deed is registered with the ROF, it may not be treated as legal document. However,
this does not prevent either the Partnership firm from suing someone or someone suing the
partnership firm in a court of law.
 Limited Liability Partnership

Limited Liability Partnership (LLP) firm is a new form of business entity established by an Act
of the Parliament. LLP allows members to retain flexibility of ownership (similar to Partnership
Firm) but provides a liability protection. The maximum liability of each partner in an LLP is
limited to the extent of his/her investment in the firm. An LLP has its owner Permanent
Account Number (PAN) and legal status. LLP also provides protection to partners for illegal or
unauthorized actions taken by other partners of the LLP. A Private or Public Limited Company
as well as Partnership Firms are allowed to be converted into an Limited Liability Partnership.

 Private Limited Company

A Private Limited Company in India is similar to a C-Corporation in the US. Private Limited
Company allows owners to subscribe to its shares by paying a share capital fees. On
subscribing to shares, the owners/members become shareholders on the company. A Private
Limited Company is a separate legal entity both in terms of taxation as well as liability. The
personal liability of the shareholders is limited to their share capital. A private limited company
can be formed by registering the company name with appropriate Registrar of Companies
(ROC). Draft of Memorandum of Association and Article of Association are prepared and
signed by the promoters (initial shareholders) of the company. A Private Limited Company can
have between 2 to 50 members with minimum share capital of Rs 1,00,000 (one lac). To look
after the day to day activities of the company, Directors are appointed by the Shareholders.
Minimum two Directors must be appointed to look after the daily affairs of the company. A
Private Limited Company has more compliance burden when compared to a Partnership and
LLP. For example, the Board of Directors must meet every quarter and at least one annual
general meeting of Shareholders and Directors must be called. Accounts of the company must
be prepared in accordance with Income Tax Act as well as Companies Act. Also Companies are
taxed twice if profits are to be distributed to Shareholders. Closing a Private Limited Company
is a tedious process and requires many months.

One the positive side, Shareholders of a Private Limited Company can change without affecting
the operational or legal standing of the company. Generally Venture Capital investors prefer to
invest in businesses that are Private Limited Company since it allows great degree of separation
between ownership and operations. It also allows investors to exit the company by selling
shares without being liable for company affairs.

 Public Limited Company

Public Limited Company is similar to Private Limited Company with the difference being that
number of shareholders of a Public Limited Company can be unlimited with a minimum seven
members. It is generally very difficult to establish a public limited company. A Public Limited
Company can be either listed in a stock exchange or remain unlisted. A Listed Public Limited
Company allows shareholders of the company to trade its shares freely on the stock exchange.
A Public Limited Company requires more public disclosures and compliance from the
government as well as market regular SEBI (Securities and Exchange Board of India) including
appointment of independent directors on the board, public disclosure of books of accounts, cap
of salaries of Directors and CEO. Like a Private Limited Company, a Public Limited Company
is also an independent legal person, its existence is not affected by the death, retirement or
insolvency of any of its shareholders.

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