UNIT II POLICY & INSTITUTIONAL ECO SYSTEM FOR

ENTREPRENEURSHIP
Factors Affecting Entrepreneurship growth

1. Economic Factors
2. Non-Economic Factors
Economic Factors

1. Capital

Capital is one of the most important factors of production for the establishment
of an enterprise. Increase in capital investment in viable projects results in
increase in profits which help in accelerating the process of capital formation.
Entrepreneurship activity too gets a boost with the easy availability of funds for
investment.

Availability of capital facilitates for the entrepreneur to bring together the land
of one, machine of another and raw material of yet another to combine them to
produce goods. Capital is therefore, regarded as lubricant to the process of
production.

France and Russia exemplify how the lack of capital for industrial pursuits
impeded the process of entrepreneurship and an adequate supply of capital
promoted it.

2. Labor

Easy availability of right type of workers also effect entrepreneurship. The

quality rather than quantity of labor influences the emergence and growth of
entrepreneurship. The problem of labor immobility can be solved by providing
infrastructural facilities including efficient transportation.

The quality rather quantity of labor is another factor which influences the
emergence of entrepreneurship. Most less developed countries are labor rich
nations owing to a dense and even increasing population. But entrepreneurship
is encouraged if there is a mobile and flexible labor force. And, the potential
advantages of low-cost labor are regulated by the deleterious effects of labor
immobility. The considerations of economic and emotional security inhibit
labor mobility. Entrepreneurs, therefore, often find difficulty to secure
sufficient labor.
3. Raw Materials

The necessity of raw materials hardly needs any emphasis for establishing any
industrial activity and its influence in the emergence of entrepreneurship. In the
absence of raw materials, neither any enterprise can be established nor can an
entrepreneur be emerged

It is one of the basic ingredients required for production. Shortage of raw

material can adversely affect entrepreneurial environment. Without adequate
supply of raw materials no industry can function properly and emergence of
entrepreneurship to is adversely affected.

In fact, the supply of raw materials is not influenced by themselves but

becomes influential depending upon other opportunity conditions. The more
favorable these conditions are, the more likely is the raw material to have its
influence of entrepreneurial emergence.

4. Market

The role and importance of market and marketing is very important for the
growth of entrepreneurship. In modern competitive world no entrepreneur can
think of surviving in the absence of latest knowledge about market and various
marketing techniques.

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The fact remains that the potential of the market constitutes the major
determinant of probable rewards from entrepreneurial function. Frankly
speaking, if the proof of pudding lies in eating, the proof of all production lies
in consumption, i.e., marketing.

The size and composition of market both influence entrepreneurship in their

own ways. Practically, monopoly in a particular product in a market becomes
more influential for entrepreneurship than a competitive market. However, the
disadvantage of a competitive market can be cancelled to some extent by
improvement in transportation system facilitating the movement of raw
material and finished goods, and increasing the demand for producer goods.

5. Infrastructure

Expansion of entrepreneurship presupposes properly developed communication

and transportation facilities. It not only helps to enlarge the market, but expand
the horizons of business too. Take for instance, the establishment of post and
telegraph system and construction of roads and highways in India. It helped
considerable entrepreneurial activities which took place in the 1850s.
Apart from the above factors, institutions like trade/ business associations,
business schools, libraries, etc. also make valuable contribution towards
promoting and sustaining entrepreneurship’ in the economy. You can gather all
the information you want from these bodies. They also act as a forum for
communication and joint action.

Non-Economic Factors

1. Education

Education enables one to understand the outside world and equips him with the
basic knowledge and skills to deal with day-to-day problems. In any society,
the system of education has a significant role to play in inculcating
entrepreneurial values.

In India, the system of education prior to the 20th century was based on
religion. In this rigid system, critical and questioning attitudes towards society
were discouraged. The caste system and the resultant occupational structure
were reinforced by such education. It promoted the idea that business is not a
respectable occupation. Later, when the British came to our country, they
introduced an education system, just to produce clerks and accountants for the
East India Company, The base of such a system, as you can well see, is very
anti-entrepreneurial.

Our educational methods have not changed much even today. The emphasis is
till on preparing students for standard jobs, rather than marking them capable
enough to stand on their feet.

2. Attitude of the Society

A related aspect to these is the attitude of the society towards entrepreneurship.

Certain societies encourage innovations and novelties, and thus approve
entrepreneurs’ actions and rewards like profits. Certain others do not tolerate
changes and in such circumstances, entrepreneurship cannot take root and
grow. Similarly, some societies have an inherent dislike for any money-making
activity. It is said, that in Russia, in the nineteenth century, the upper classes
did not like entrepreneurs. For them, cultivating the land meant a good life.
They believed that rand belongs to God and the produce of the land was
nothing but god’s blessing. Russian folk-tales, proverbs and songs during this
period carried the message that making wealth through business was not right.
3. Cultural Value

Motives impel men to action. Entrepreneurial growth requires proper motives

like profit-making, acquisition of prestige and attainment of social status.
Ambitious and talented men would take risks and innovate if these motives are
strong. The strength of these motives depends upon the culture of the society. If
the culture is economically or monetarily oriented, entrepreneurship would be
applauded and praised; wealth accumulation as a way of life would be
appreciated. In the less developed countries, people are not economically
motivated. Monetary incentives have relatively less attraction. People have
ample opportunities of attaining social distinction by non-economic pursuits.
Men with organizational abilities are, therefore, not dragged into business.
They use their talents for non-economic end.

Entrepreneurship Development Programmes

Meaning:
As the term itself denotes, EDP is a programme meant to develop
entrepreneurial abilities among the people. In other words, it refers to
inculcation, development, and polishing of entrepreneurial skills into a person
needed to establish and successfully run his / her enterprise. Thus, the concept
of entrepreneurship development programme involves equipping a person with
the required skills and knowledge needed for starting and running the
enterprise.

Need for EDPs

That, entrepreneurs possess certain competencies or traits. These competencies

or traits are the underlying characteristics of the entrepreneurs which result in
superior performance and which distinguish successful entrepreneurs from the
unsuccessful ones. Then, the important question arises is: where do these traits
come from? Or, whether these traits are in born in the entrepreneurs or can be
induced and developed? In other words, whether the entrepreneurs are born or
made? Behavioural scientists have tried to seek answers to these questions.
Subject Name Subject Code Semester Prepared by ENTREPRENEURIAL
DEVELOPMENT 18BBA65S VI Dr.R.Geetharamani, Assistant Professor A
well-known behavioural scientist David C. McClelland (1961) at Harvard
University made an interesting investigation-cum-experiment into why certain
societies displayed great creative powers at particular periods of their history?
What was the cause of these creative bursts of energy? He found that ‘the need
for achievement (n’ ach factor)’ was the answer to this question. It was the
need for achievement that motivates people to work hard. According to him,
moneymaking was incidental. It was only a measure of achievement, not its
motivation. In order to answer the next question whether this need for
achievement could be induced, he conducted a five-year experimental study in
Kakinada, i.e. one of the prosperous districts of Andhra Pradesh in India in
collaboration with Small Industries Extension and Training Institute (SIET),
Hyderabad. This experiment is popularly known as ‘Kakinada Experiment’.
Under this experiment, young persons were selected and put through a three-
month training programme and motivated to see fresh goals. One of the
significant conclusions of the experiment was that the traditional beliefs did not
seem to inhibit an entrepreneur and that the suitable training can provide the
necessary motivation to the entrepreneurs (McClelland & Winter 1969). The
achievement motivation had a positive impact on the performance of
entrepreneurs. In fact, the ‘Kakinada Experiment’ could be treated as a
precursor to the present day EDP inputs on behavioural aspects. In a sense,
‘Kakinada Experiment’ is considered as the seed for the Entrepreneurship
Development Programmes (EDPs) in India. The fact remains that it was the
‘Kakinada Experiment’ that made people appreciate the need for and
importance of the entrepreneurial training, now popularly known as ‘EDPs’, to
induce motivation and competence among the young prospective
entrepreneurs. Based on this, it was the Gujarat Industrial Investment
Corporation (GIIC) which, for the first time, started a three-month training
programmes on entrepreneurship development. Impressed by the results of
GIIC’s this training programme, the Government of India embarked, in 1971,
on a massive programme on entrepreneurship development. Since then, there is
no looking back in this front. By now, there are some 686 all-India and State
level institutions engaged in conducting EDPs in hundreds imparting training to
the candidates in thousands. Till now, 12 State Governments have established
state-level Centre for Entrepreneurship Development (CED) or Institute of
Entrepreneurship Development (lED) to develop entrepreneurship by
conducting EDPs. Today, the EDP in India has proliferated to such a
magnitude that it has emerged as a national movement. It is worth mentioning
that India operates the oldest and largest programmes for entrepreneurship
development in any developing country. The impact of India’s EDP movement
is borne by the fact that the Indian model of entrepreneurship development is
being adopted by some of the developing countries of Asia and Africa.
Programmes similar to India’s EDPs are conducted in other countries also, for
example, ‘Junior Achievement Programme’ based on the principle of ‘catch
them young’ in USA and ‘Young Enterprises’ in the U. K.

Objectives of EDP:
The major objectives of the Entrepreneurship Development Programmes
(EDPs) are to: a. Develop and strengthen the entrepreneurial quality, i.e.
motivation or need for achievement. b. Analyse environmental set up relating
to small industry and small business. c. Select the product. d. Formulate
proposal for the product. e. Understand the process and procedure involved in
setting up a small enterprise. f. Know the sources of help and support available
for starting a small scale industry. g. Acquire the necessary managerial skills
required to run a small-scale industry. h. Know the pros and cons in becoming
an entrepreneur. i. Appreciate the needed entrepreneurial discipline. j. Besides,
some of the other important objectives of the EDPs are to: k. Let the
entrepreneur himself / herself set or reset objectives for his / her enterprise and
strive for their realization. l. Prepare him / her to accept the uncertainty in
running a business. m. Enable him / her to take decisions. n. Enable to
communicate clearly and effectively. o. Develop a broad vision about the
business. The entrepreneurship development programme (EDP) normally runs
through three important phases followed by EDP evaluation: Phases of
Entrepreneurial Development Programme An entrepreneurial development
programme consists of three broad phases:
1. Pre-training Phase
2. Training Phase
3. Post-training Phase
1. Initial Phase :
This phase includes the activities and the preparations required
to launch the training programme. The main activities of this phase are:
(a) Arrangement of Infrastructure for training
(b) Preparation of training syllabus and application form
(c) Tie up of guest faculty
(d) Designing tools and techniques for selecting the trainees
(e) Formation of selection committee
(f) Publicity campaign for the programme Thus, initial stage involves the
identification and selection of potential entrepreneurs and providing initial
motivation to them.

2. Training Phase :
In this phase the training programme is implemented to develop
motivation and skills among the participants. The objective of this
phase is to bring desirable changes in the behaviour of the trainees. The
trainers have to judge how much, and how far the trainees have moved
in their entrepreneurial pursuits. A trainer should see the following
changes in the behaviour of participants.
(a) Is there any change in his entrepreneurial outlook, role and skill ?
(b) Is he motivated to plunge for entrepreneurial venture and risk that is
expected of an entrepreneur?
(c) What kind of entrepreneurial behaviour does the trainee lack?
(d) Does he possess the knowledge of technology, resources and other related
entrepreneurial knowledge?
(e) Is he skilful in choosing the right project, mobilising the right resources at
the right time?

3. Post-Training or Follow-up Phase :

Under this phase it is assessed that how far the objectives of the
programme have been achieved. Monitoring and follow up reveals
drawbacks in the earlier phases and suggests guidelines, for framing the
future policy. In this phase infrastructural support, counselling and
assistance in establishing new enterprise and in developing the existing
units can also be reviewed.
Selection of Potential Entrepreneurs Problems of EDPs:
EDPs suffer on many counts. The problems and lacunae are on
the part of all those who are involved in the process, be it the trainers
and the trainees, the ED organisations, the supporting organizations, and
the state governments. The important problems EDPs face are but not
confined to the following only: a. Trainer-motivations are not found
upto the mark in motivating the trainees to start their own enterprises. b.
ED organisations lack in commitment and sincerity in conducting the
EDPs. In some cases, EDPs are used as means to generate surplus
(income) for the ED organisations. c. Non-conducive environment and
constraints make the trainer-motivators’ role ineffective. d. The
antithetic attitude of the supporting agencies like banks and financial
institutions serves as stumbling block in the success of EDPs. Thus, it is
clear that the problems are not with the strategy but with its
implementation. Entrepreneurship Development Programme –

Course Contents and Curriculum of EDPs

The course contents of an EDP should be formulated as per the
objectives of the EDPs. It should consist of the following:
1. General Approach to Entrepreneurship:
The participants should be given exposure about the conceptual
framework of entrepreneurship role, expectation, Entrepreneurial environment
etc. Innovative behaviour related issues should be focused to enlighten the
entrepreneurs about their future challenges and prospects. Besides,
development agencies should try to design appropriate strategies enabling the
potential entrepreneur to tackle different risk inherent in an innovation activity.
These risks are as follows:
(i) Technical risks – the risk of not knowing enough about the technical
processes, materials etc.
(ii) Economic Risks – the risk of market fluctuations and changes in relation to
raw materials etc.
(iii) Social Risks – the risk inherent in the development of new
relationship.
(iv) Environmental Risks – risk which result from environmental
changes in the manager’s work as an outcome of the new activity.
Moreover, prospective entrepreneurs should be given a detailed
information with regard to facilities generally provided by the
government and other agencies involved in promotion of
entrepreneurship.
2. Motivational Training:
Motivational training inputs are meant for developing the
motivation of potential entrepreneurs and their enterprise building skills.
Besides, motivational inputs also include psychological games, tests,
goal setting exercises, role play etc. The motivational inputs will be
aimed at increasing the participants, understanding of the entrepreneurial
 personality and entrepreneurial behaviour and bring about through self-
study, changes in self-concept, value, skills thereby leading to positive
entrepreneurial behaviour. The major motivational inputs may be given
in the beginning of the training programme on full time basis though the
learning effected through them will be reinforced and used throughout
the training programme. The understanding of the entrepreneurial
personality and behaviour will be supplemented through interface with
one or two successful as well as not so successful entrepreneurs.

3.Developing Management Skills:

i. Prospective entrepreneurs should be given exposure in different
types of management problems. It would sharpen their
management skills. The management problems take different forms
and the management patterns are peculiar to the situation. So,
training for exposing managerial skills will be arranged in keeping
the situational requirements. However, managerial aspects should
include production planning, labour laws, cost analysis, financial
accounting, selling arrangements, taxation laws etc.

4. Training for Project Management:

Project inputs are required to help the potential entrepreneurs to
develop their project ideas into bankable projects. They should be given
acquaintance with the industrial opportunities in the area and also necessary
guidance on product selection. Necessary knowledge about project feasibility,
viability and implementation should also be given to the potential
entrepreneurs. Under project preparation, technical feasibility includes
selection of technology, availability of raw materials, selection of location and
site, availability of plant and machinery, infrastructure facilities, roads,
transport, power, manpower/personnel requirement. Similarly, market analysis,
level of competition, capital cost, working capital requirement, estimated cost
of production, projected sales volume, profitability estimates, expected rate of
return, projected cash flows and break even analysis are different aspects that
have to be incorporated in assessing the commercial viability of the project.
Sufficient exposure is necessary with regard to financing of the project.
Financing arrangement generally includes sources of financing, promoter’s
contribution, level of institutional financing, seed capital, investment subsidy
etc. Prospective entrepreneurs should be instructed about the importance of
timely implementation of project. They should be given proper training about
scheduling of various activities, provision for effective supervision and need
for avoiding delay and consequent cost escalation.

5. Structural Arrangement: Training inputs also aim at familiarising the

participants about the proposed structural arrangement for the business or
industrial unit. They should be given adequate familiarisation about
government policy regarding development of industries, especially with regard
to small scale industries, registration and licensing procedures, forms of
organisation like proprietary, partnership, private company and Joint Stock
Company, institutional setup etc.

6. Support System: In most of the cases, participants are generally first

generation entrepreneurs and they do not know about the government and
institutional support system. Support system may also be used as motivational
inputs to encourage the participants about their future prospects. They should
be familiarised with the incentives/concessions available, tax-incentives, tax
holiday, backward/zero industries districts concessions, soft loan scheme,
special schemes for technicians etc. This should be followed by acquainting
them with procedure for approaching government departments and agencies,
applying for and obtaining these concessions from them.

7. Factory Visits/In-Plant Training: Practical exposure is also necessary.

Depending upon their products the potential entrepreneurs may feel the need to
gain more knowledge about the production process etc. by visiting some of the
similar units in production. For this purpose, factory visits may have to be
arranged. Similarly, entrepreneurs who select relatively sophisticated products
will be expected to have a good idea of the product and the process facilities
should be arranged for in-plant training or prototype development on
exceptional basis.

EDP –Evaluation of Entrepreneurial Development Programme:

Evaluation of EDPs begins with an assessment of philosophy or the central
objective of the programme. The agency conducting the programme must be
clear about the purpose underlying entrepreneurial development. The objective
may be to increase the production, to help the entrepreneur for selection of the
product or project and for formulation of the project, to uplift certain people, to
appreciate the needed social responsibility etc. Evaluation of EDPs means to
check
1. How these programmes do their work properly or not,
2. How many problems are faced by these programmes at the time of
implementation? These programmes do their work properly or not, we can
measure with the help of following aspects:
i. Selection strategy and the Procedure – The success of an EDP depend largely
on proper selection of trainees. Evaluation of selection strategy and the
procedure is very necessary. The Behavioral Science Centre (India), has been
rating the selection of potential entrepreneurs, positive self-concept, initiative,
independence, problem solving, hope of success, searching environment and
time bound planning.
ii. To measure the financial result of Entrepreneur – In order to judge the
financial health of units, return on capital employed, net profit over sales, net
profit over net-worth and other ratios were used.
iii. To check the knowledge and ability of the Entrepreneur – For evaluation of
the EDP, to check or measure the knowledge and ability of the entrepreneur. It
refers to the education, training and experience of the entrepreneur.
iv. To consider the Socio-cultural background of Entrepreneur – It implies the
environment in which the entrepreneur was born and brought up. It considers
the values and attitudes of the entrepreneur.
v. To consider the Environmental Variables –
For evaluation of these programmes, should consider the
environmental variables. Environmental variables include Government
policies, Market conditions, Availability of technology and Labour
situation.
3. Problems faced by entrepreneur development programmes:
EDPs suffer on many counts. The problems are the part of those
who are involved in process such as:
i. The trainers
ii. The trainees
iii. The Entrepreneur Programme Organization
iv. The supporting organization
v. The State Government. There are various problems faced at
the time of organizing these programmes.
EDP INSTITUTIONS IN INDIA AND THEIR FUNCTIONS &
INSTITUTIONAL SUPPORT TO ENTREPRENEURS:
Governments-both Central and State, have in the past taken a
number of measures for the development of small and medium
enterprises. Government has set up a number of development
institutions to support entrepreneurs. Some of the institutions assisting
entrepreneurs include District Industries Centres (DICs) and Industrial
Estate, Small Industries Development Organisation (SIDO), Small
Industries Service Institutes (SISI), Small Industry Development
Corporation (SIDCO), Entrepreneurial Guidance Bureau (EGB),
National Alliance of Young Entrepreneurs (NAYE), National
Productivity Council (NPC) and Venture capital funds (VCF). In
addition, all India financial institutions-IDBI, IFCI, ICICI-have
promoted/sponsored a number of Technical Consultance Organisations
(TCOs) to assist small entrepreneurs in different ways. Recently, the
Small Industries Development Bank of India (SIDBI) has been
established to help small scale units. Besides, agencies like Khadi and
Village Industries Commission, Commercial Banks, Cooperative Banks,
EXIM Bank and National Science and Technology Entrepreneurship
Board undertake promotional activities aiming at support in
entrepreneurship development. Now, what follows in the subsequent
pages is the various kinds of support provided by aforesaid institutions
to the entrepreneurs to help them establish industries. Small Scale
Industries Board (SSIB) The Government of India constituted a Board,
namely, Small Scale Industries Board (SSIB) in 1954 to advise on the
development of small scale industries in the country. The SSIB is also
known as Central Small Industries Board. The range of developmental
work in small scale industries involves several departments/ministries
and several organs of the Central/State Governments. Hence, to facilitate
co-ordination and inter-institutional1inkages, the Small Scale Industries
Board has been constituted. If is an apex advisory body constituted to
render advice to the Government on all issues pertaining to the
development of small-scale industries. The Industries Minister of the
Government of India is the Chairman of the SSIB. The SSIB comprises
of 50 members including State Industry Minister, some Members of
Parliament, Secretaries of various Departments of Government of India,
financial institutions, public sector undertakings, industry associations
and eminent experts in the field. State Small Industries Corporations
Many State Governments have set up Small Industries Corporations in
order to undertake a number of commercial activities. The most
important of these activities are distribution of scarce raw materials,
supply of machinery on hirepurchase basis, constitution and
management of industrial estates, procurement of orders from
Government Departments, assistance in export marketing and in certain
cases provision of financial, technical and managerial assistance to small
enterprises. Small Industries Development Corporation (SIDCO) In
Tamilnadu SIDCO is the state small industries corporation. It plays a
lead role in developing small scale sector. It provides the following
facilities to small scale units : (a) It makes provision of constructed
sheds/plots in industrial estates. These are sold to entrepreneurs on hire-
purchase basis or given on rental basis. (b) Assistance in procuring some
scarce key raw materials like iron and steel, paraffin wax, potassium
chlorate, Fatty Acids, etc., through its various distribution centres. (c)
Financial assistance in the form of subsidies to industrial units in
backward areas like Central Investment subsidy, state capital subsidy.
Interest-Free sales tax loans, power tariff subsidy and margin money
assistance for the rehabilitation of the sick small scale industries. (d)
Marketing assistance to small entrepreneurs. Small Industries Service
Institutes (SISIs) The Small Industries Services Institutes (SISIs) are set
up to provide consultancy and training to small entrepreneurs-both
existing and prospective. The activities of SISIs are coordinated by the
Industrial Management Training division of the DCSSI’s office. There
are 28 SISIs and 30 branch SISIs set up in State capital and other places
all over the country. The main functions of SISIs include : • To serve as
interface between Central and State Governments. • To render technical
support services. • To conduct Entrepreneurship Development
Programmes. • To initiate promotional programmes. The SISIs also
render assistance in the following areas :
(i) Economic Consultancy/Information/EDP Consultancy.
(ii) Trade and market informations.
(iii) Project profiles.
(iv) State industrial potential survey.
 (v) District industrial potential surveyes.
(vi) Modernisation and inplant studies.
(vii) Workshop facilities.
(viii) Training in various trade/activities. District Industries
Centres (DICs) The District Industries Centres (DICs) were established
in May 1978 with a view to provide integrated administrative
framework at the district level forpromotion of small-scare industries in
rural areas. The DICs are envisaged as a single window interacting
agency with the entrepreneur at the district level. Services and support to
small entrepreneurs are provided under a single roof through the DICs.
They are the implementing arm, of the Central and State Governments
for various schemes and programmes. Registration of small industries is
done at the district industries centres. The organisational structure of
DICs consists of General Manager, four Functional Managers and three
Project Managers to provide technical service in the area relevant to the
needs of district concerned. Management of the DIC’s is done by the
State Governments. The scheme has now been transferred to the states
and from the year 1993-94, funds will not be provided by the Central
Government to the States for running the DICs. Functions : The DICs
role is mainly promotional and developmental. To attain this, they have
to perform the following main functions : • To conduct industrial
potential surveys keeping in view the availability of resources in terms
of material and human skill, infrastructure, demand for product, etc. To
prepare techno-economic surveys and identify product lines and then to
provide investment advice to entrepreneurs. • To prepare an action plan
to effectively implement the schemes identified. • To guide
entrepreneurs in matters relating to selecting the most appropriate
machinery and equipment, sources of its supply and procedure for
procuring imported machinery, if needed, assessing requirements for
raw materials etc.
• To appraise the worthiness of the various proposals received
from entrepreneurs.
• To assist the entrepreneurs in marketing their products and
assess the possibilities of ancillarisation and export promotion of
their products.
• To undertake product development work appropriate to small
industries.
• To conduct artisan training programmes.
• To function as the technical arms of DRDA in administering
IRD and TRYSEM programmes. National Small Industries
Corporation Ltd. (NSIC) The National Small Industries
Corporation Ltd. (NSIC), an enterprise under the Union Ministry
of Industries, was set up in 1955 to promote, and foster the
growth of small scale industries in the country. NSIC provides a
wide range of services, predominantly promotional in character to
small scale industries. Its main functions are:
 • To provide machinery on hire-purchase scheme to small scale
industries.
• To provide equipment leasing facility.
• To help in export marketing of the products of small scale
industries.
• To develop proto-type of machines and equipments to pass on
to small scale industries for commercial production.
• To distribute basic raw material among small scale industries
through raw material depots.
• To help in the development and upgradation of technology and
implementation of modernisation programmes of small scale
industries.
• To impart training in various industrial trades.
• To undertake the construction of industrial estates.
Small Industries Development Organisation (SIDO) Small Industries
Development Organisation (SIDO) is a subordinate office of the Department of
SSI & ARI. It is an apex body and nodal agency for formulating, coordinating
and monitoring the policies and programmes for promotion and development of
small-scale industries. Development Commissioner is the head of the SIDO. He
is assisted by various directors and advisers in evolving and implementing
various programmes of training and management consultancy, industrial
investigation, possibilities for development of different types of Small scale
industries, development of industrial estates, etc. The main functions of SIDO
are classified into
(i) co-ordination,
(ii) industrial development and
(iii) extension.
These functions are performed through a national network of institutions and
associated agencies. All small-scale industries except those falling within the
specialised boards and agencies like KVIC, Coir Boards, Central Silk Board,
etc. fall under the purview of the SIDO. Following are the main tasks
performed by the SIDO in each of its three categories of functions. Functions
Relating to Co-ordination
• To evolve a national policy for the development of small scale industries,
• To co-ordinate the policies and programmes of various State Governments,
• To maintain a proper liasion with the related Central Ministries, Planning
commission, State Governments, Financial Institutions, etc., and To co-
ordinate the programmes for the development of industrial estates. Functions
Relating to Industrial Development
• To reserve items for production by small-scale industries,
• To collect data on consumer items imported and then, encourage the setting of
industrial units to produce these items by giving coordinated assistance,
• To render required support for the development of ancillary units, and
• To encourage small scale industries to actively participate in Government
Stores Purchase Programme by giving them necessary guidance, market advice
and assistance. Functions Relating to Extension
• To make provision of technical services for improving technical process,
production planning, selecting appropriate machinery, preparing factory layout
and design.
• To provide consultancy and training services to strengthen the competitive
ability of small-scale industries.
• To render marketing assistance to small-scale industries to effectively sell
their products, and
• To provide assistance in economic investigation and information to small
scale industries. Entrepreneurial Guidance Bureau (EGB) The EGB has, been
set up to guide entrepreneurs in identifying investment opportunities, assisting
them in selecting locations or the projects, preparing project profiles, assisting
them to get financial assistance. EGB has been supplying information
pertaining to the products that offer scope for manufacture, statistical details
relating to demand, capacity production, sources of raw materials, types of
equipments required, investment involved, sources of finance, etc. Information
of procedures pertaining to obtaining letters of intent, import of capital
equipment, export of finished products is also furnished. EGB also renders
assistance from banks/financial institutions or for submitting proposals for the
letter of intent, etc. EGB also establishes direct contact with engineering
graduates, technically qualified personnel and small entrepreneurs to promote
entrepreneurship development. To render required support for the development
of ancillary units, and
• To encourage small scale industries to actively participate in Government
Stores Purchase Programme by giving them necessary guidance, market advice
and assistance. Functions Relating to Extension
• To make provision of technical services for improving technical process,
production planning, selecting appropriate machinery, preparing factory layout
and design.
• To provide consultancy and training services to strengthen the competitive
ability of small-scale industries.
• To render marketing assistance to small-scale industries to effectively sell
their products, and
• To provide assistance in economic investigation and information to smallscale
industries. Entrepreneurial Guidance Bureau (EGB) The EGB has, been set up
to guide entrepreneurs in identifying investment opportunities, assisting them
in selecting locations or the projects, preparing project profiles, assisting them
to get financial assistance. EGB has been supplying information pertaining to
the products that offer scope for manufacture, statistical details relating to
demand, capacity production, sources of raw materials, types of equipments
required, investment involved,sources of finance, etc. Information of
procedures pertaining to obtaining letters of intent, import of capital equipment,
export of finished products is also furnished. EGB also renders assistance from
banks/financial institutions or for submitting proposals for the letter of intent,
etc. EGB also establishes direct contact with engineering graduates, technically
qualified personnel and small entrepreneurs to promote entrepreneurship
development. Khadi And Village Industries Commission (KVlC) KVIC was set
up in 1953. The primary objective of establishing KVIC is to develop Khadi
and Village industries and improving rural employment opportunities. Its wide
range of activities include training of artisans, extension of assistance for
procurement of raw materials, marketing of finished products and arrangement
for manufacturing and/ distribution of improved tools, equipment and
machinery to producers on concessional terms. KVIC provides assistance to
Khadi and Village industries which are characterized by low capital intensity
and ideally suited to manufacturing utility goods by using locally available
resources. There are about 26 specified-village industries such as processing of
cereals and pulses, leather, cottage matches, gur and khandsari, palm gur, non-
edible oils and soaps, village pottery, carpentry, gobargas, household
aluminium utensils, etc. KVIC’s policies and programmes are executed through
30 State Khadi and Village Industries Boards, 2320 institutions registerd under
the Societies Registration Act, 1960 and about 30,600 Industrial Cooperative
Societies registered under State Cooperative Societies Act. Activities involving
pioneering types of work, such as developing new industries in hilly, backward
and inaccessible areas are undertaken by KVIC directly. National Institute of
Entrepreneurship and Small Business Development (NISEBUD), New Delhi It
is an apex national level institute of its kind set up at New Delhi in 1983. Its
main functions are to coordinate research and training in entrepreneurship
development and to impart specialised training to various categories of
entrepreneurs. Besides, it also serves as a forum for interaction and exchange of
views between various agencies engaged in activities relating to entrepreneurial
development National Institute of Small Industries Extension Training
(NISIET), Hyderabad This institute was set up in 1956 to develop the required
manpower for running small-scale industries in the country. Accordingly, its
main functions are: (a) To impart training to the persons engaged in small-scale
industries. (b) To undertake research studies relating to development of small-
scale industries. (c) To enter into agreements relating to consultancy services
both with national and international organisations to provide consultancy
services to small industries in the country. The institute conducts courses in
business management for the benefit of the entrepreneurs and semi-managerial
personnel of small industries. It is locatedat Hyderabad. Other Institutes
Supporting Entrepreneurs Following are some of the important institutes set up
by the Government for development of small-scale industries : (a) Electronic
Training and Service Institute, Nainital. (b) Central Machine Tools Limited,
Bangalore. (c) Sports Goods and Leisure Time Equipment, Meerut. (d) Central
Institute of Plastics Engineering and Tools, Madras. (e) National Institute of
Foundry and Forging Technology, Ranchi. Technical Consultancy
Organisations (TCOs) A network of Technical Consultancy Organisations
(TCOs) was established by the all India financial institutions in the seventies
and the eighties in collaboration with state level financial/development
institutions and commercial banks to cater to the consultancy needs of small
industries and new entrepreneurs. At present, there are 17 TCOs operating in
various states, some of them covering more than one state. These 17 TCOs are:
1. Andhra Pradesh Industrial and Technical Consultancy Organisation Ltd.
(APITCO).
2. Bihar Industrial and Technical Consultancy Organisation Ltd. (BITCO).
3. Gujarat Industrial and Technical Consultancy Organisation Ltd. (GITCO).
4. Haryana-Delhi Industrial Consultants Ltd. (HARDICON).
5. Himachal Consultancy Organisation Ltd. (HIMCO).
6. Industrial and Technical Consultancy Organisation of Tamil Nadu Ltd.
(ITCOT).
7. Jammu and Kashmir Industrial and Technical Consultancy Organisation
Ltd. (J&KITCO).
8. Karnataka Industrial and Technical Consultancy Organisation Ltd.
(KITCO).
9. Madhya Pradesh Consultancy Organisation Ltd. (MPCON).
10. Mahrashra Industrial and Technical Consultancy Organisation. Ltd.
(MITCON).
11. North-Eastern Industrial Consultants Ltd. (NECON).
12. North-Eastern Industrial and Technical Consultancy Organisation Ltd.
(NEITCO).
13. North-India Technical Consultancy Organisation Ltd. (NITCON).
14. Orissa Industrial and Technical Consultancy Organisation Ltd.
(ORITCON).
15. Rajasthan Consultancy Organisation Ltd. (RAJCON).
16. U.P. Industrial Consultants Ltd. (UPICO).
17. West Bengal Consultancy Organisation Ltd. (WEBCON).
Functions Initially, TCOs’ functions were focused on pre-investment studies
for small and medium scale enterprises. Over the years, they have diversified
their functions to include the following:
• To prepare project profiles and feasibility profiles.
• To undertake industrial potential surveys.
• To identify potential entrepreneurs and provide them with technical and
management assistance.
• To undertake market research and surveys for specific products.
• To supervise the project and where necessary, render technical and
administrative assistance.
• To undertake export consultancy for export-oriented projects based on
modern technology.
• To conduct entrepreneurship development programmes.
• To offer merchant banking services.
• A summary view of the progress/performance of TCOs Commercial banks
and Entrepreneurial Development In recent times commercial banks have not
confined themselves to mere extension of finance to small entrepreneurs but
have shown genuine concern for their progress and development. They have
now entered the challenging field of promoting new small scale entrepreneurs
through entrepreneurship development programmes. In their new role as
promoters of small scale sector they have accepted yet another challenging
task. They are now holding EDPs in collaboration with specialized institutions
such as DIC, SISI, TCOs, etc. with a view to identifying entrepreneurs,
especially in backward areas, and training and monitoring them to start new
ventures. The Content in the E-Material has been taken from the text and
reference book as given in the Syllabus.