NCERT Solutions for Class 11 Business Studies Chapter 9 Small Business and Entrepreneurship. Students can take help to understand the answers of long answer questions and short answer questions given in the exercises at the end of the chapter 9. Study material related to chapter 9 of 11th B St in Hindi and English Medium are also given to download free in PDF file format for academic session 2024-25.

11th Business Studies Chapter 9 Small Business and Entrepreneurship

Class: 11Business Studies
Chapter: 9Small Business and Entrepreneurship
Contents:NCERT Solutions and Study Material

Class 11 Business Studies Chapter 9 Solutions

11th B St Chapter 9 Short Answer Questions

What are the different parameters used to measure the size of the business?

A business uses various parameters to measure the size of a business.
(a) Number of people employed/hired in the business.
(b) Amount of funds/ working capital invested in the business.
(c) Volume or value or units of output produced by the business.
(d) Power consumption by the business in carrying out its activities.

What is the definition used by Government of India for small scale industries?

The Government of India has defined an industry as a small scale industry, based on the level of investment. Investment is made in Fixed Assets, Tangible Assets and Intangible assets. Industries where the amount invested in the fixed assets (particularly plant and machinery) is less than ₹1crore are regarded as small-scale industries. However, export-oriented units that use modern production techniques are considered as small-scale industries if their investment does not exceed ₹5crore.

How would you differentiate between an ancillary and a tiny unit?
Basis of differenceAncillary industrial units Tiny units
NatureSupply to parent units is a minimum of 50% of their production.Investment in fixed assets is limited to a maximum of ₹25 lakh.
Investment The maximum level of investment is ₹1 crore.The maximum level of investment is ₹25 lakh.
ObligationAssistance to be provided to parent unit by supply of at least 50% of their production.No such obligations.
ExamplesIndustries engaged in the production of machine parts, tools and other intermediate products.Business units such as small shops, boutiques, STD booths and photocopy centres.
State the features of cottage industries.

The following are a few important features of cottage industries:

    • (a) Ownership: These are owned and operated by individuals in private sector with private resources.
    • (b) Labour employed: The labour involved in such industries is either local or they employ the owners’ family members.
    • (c) Technology and skill: Usually, the technology used is indigenous and the skills required for cottage industries are family restricted. The skills are passed on from one generation to the next.
    • (d) Capital Investment: The amount of capital is very small, and the production techniques are highly labour-intensive.
    • (e) Market: Only a limited portion of the output is sold in the local market.

11th B St Chapter 9 Long Answer Questions

How do small scale industries contribute to the socio-economic development of India?

Small-scale industries play an important role in ensuring the progress of developing countries such as India. The following points are:
(a) Market share: SSIs make up 95 percent of the industrial units in India. They contribute about 40 percent of the ‘gross industrial value added’ and 45 percent of India’s total exports.
(b) Employment opportunities: SSI’s use labour-intensive production techniques and require human resource to carry out functions and operations. Moreover, the skills required to perform jobs in SSI’s are usually not very specific, which further increases their scope for generating employment.
(c) Variety of products: Small-scale units produce a large variety of consumer products to meet the requirements of mass, such as stationery items, handicrafts, vegetables and processed food.
(d) Technology and Working capital: SSI’s produce basic products and use simple technology. Moreover, these industries require basic investment in working capital, and therefore, they can be set up even in remote areas by anyone across a country without many hurdles. Small units not only benefit the particular region where it is established but also help reduce the regional disparities in industrial development among different regions of a country.
(e) Consumer specific goods: Small industrial can customise products according to specific needs of consumers. Due to use of simple and flexible production techniques, they can easily adhere to customers’ tastes and preferences.
(f) Decision making: The SSI’s do not have large managerial hierarchy system and the decision making process is relatively quick and simple.
(g) The cost of goods produced is low and even the cost of produce is minimal.

Describe the role of small business in rural India.

The following are some of the major roles played by small-scale businesses in rural India.
(a) Employment opportunities: Small business use labour-intensive production techniques and require human resource to carry out functions and operations. Moreover, the skills required to perform jobs in SSI’s are usually not very specific, which further increases their scope for generating employment. This proves to be a boon especially for the economically weaker sections of the rural society.
(b) Poverty and Unemployment: They help overcome mitigate unemployment by generating employment for labours and alleviate poverty by generating income for them. Small-scale businesses use labour-intensive production techniques, and are, therefore, able to provide employment to the excess/surplus rural labour.
(c) Equitable income distribution: The capital requirements of small-scale businesses are low and they link various other sectors and industries by encouraging entrepreneurs to start units on a small scale. The employment and income triggers the redistribution of wealth and income, and enables the equitable distribution of income in rural areas.
(d) Economic growth: Small-scale businesses play a major role in growth acceleration and employment generation, particularly in the rural and backward areas of India.
(e) Reduce migration from rural to urban areas: People move from rural to urban areas in search of employment opportunities.
Small businesses facilitate rural development and provide employment opportunities and improved living standards in rural areas.

Discuss the problems faced by small scale industries.

The following are the major problems faced by small-scale industries (SSIs) in India.

    1. Sources of finance and credit: The SSIs usually face the problem of inadequate finance and credit. This is majorly due to lack of capital available with the players in the sector and partly because of requirement of security to be provided with financial institutions. As a result, these businesses have to rely on local financial resources and moneylenders for funds.
    2. Procuring raw materials: Due to lack of funds, SSIs also face a problem of procuring raw materials necessary for carrying out their day-to-day business activities. In addition, the poor transportation network results in untimely supply of raw materials which hinders their smooth functioning.
    3. Labour problems: As SSI’s cannot afford to pay high salaries to their employees, they usually have to settle for semi-skilled or unskilled labourers. Hence, the lack of skilled manpower adversely affects their efficiency.
    4. Marketing: Small industries are unable to market and promote their product at a bigger level due to shortage of funds. Lack of efficient marketing system forces them to sell their products in the markets through the middlemen, which further leads to the exploitation of the small scale entrepreneurs.
    5. Obsolete/outdated technology: The technology used in production is usually outdated and obsolete which does not match up to the technology used by big industries. This impacts the productivity and efficiency levels making their operations unfeasible.
    6. Market Capitalisation: The market captured by small scale units is limited due to the lack of resources and networking channels. They are not able to reach customers at large and are restricted geographically.
    7. Quality Control: Since the resources, manpower and technology is not at benchmark level the product quality is sometimes compromised and the cost effectiveness is impacted.
What measures has the government taken to solve the problems of finance and marketing in the small scale sector?

The small-scale sector has played a major role in employment generation, regional development and export promotion in India. The Government of India has realised that a lot more can be achieved if the two major bottlenecks that affect the further development of SSIs-inadequate funds and inefficient market penetration-are removed. In pursuit of this objective, the government has established the following agencies.

    • (a) National Bank for Agriculture and Rural Development (NABARD): It was established in 1982 with the main objective of promoting rural development and integrating the efforts in this direction. This agency is an apex banking body that governs the operations particularly of the rural and ‘gramin’ banks. The main focus of NABARD is to provide cheap and easy credit facility to small, cottage and rural industries.
    • (b) Small Industries Development Bank of India (SIDBI): It was set up to provide direct and indirect financial assistance under different schemes. It caters to the credit and finance requirements of especially small-scale enterprises.
    • (c) World Association for Small and Medium Enterprises (WASME): It is an international non-governmental organisation that addresses the problems of small- and medium-scale enterprises. It has set up an ‘International Committee for Rural Industrialisation’ with the aim of designing a model for the growth and development of rural industries.
    • (d) The National Commission for Enterprises in the Unorganised Sector (NCEUS): It was formed in September 2004 with the objective of improving the efficiency and enhancing the global competitiveness of small-scale industries. It focuses on addressing the problems faced by small enterprises, particularly in the unorganised/informal sector.
    • (e) Various development and employment generation programmes. Besides establishing the organisations mentioned above, the government has launched various programmes for rural development. Among the important programmes are the Prime Minister’s Rozgar Yojana (PMRY), Integrated Rural Development Programme (IRDP) and Training of Rural Youth for Self-Employment (TRYSEM). These programmes are aimed at generating greater employment opportunities, developing rural areas and making the rural people self-reliant.
What are the incentives provided by the government for industries in backward and hilly areas?

Entrepreneurs find it attractive and feasible to setup industries in metropolitan and other developed regions. Various factors such as irregular power supply, poor transport and absence of banking facilitates, make it extremely difficult for them to set up industries in backward, hilly and tribal areas. The Government of India comes up with various schemes and incentives for establishment of industries in rural and hilly areas to remove the regional imbalances in development. The following are among the incentives offered:

    • Land: It is the first and foremost requirement for setting up a business unit. The government provides land plots at concessional rates, especially to industrialists in backward regions. This makes setting-up industries cheaper.
    • Power: Power is a core requirement for the functioning of business enterprises. The government provides electricity at concessional rates to encourage setup in rural areas. Due to highly irregular supply of electricity in some parts of India, government even provides free electricity for initial few years.
    • Water resource: The water supply is setup by government at a no profit basis. The industries are not charged for water for initial few years of setup.
    • Financial Assistance: Industries set up in the backward areas have to deal with liquidity and credit problems due to the poor banking facilities. As a result, the government provides financial assistance like loans, overdrafts, short term credits at a concessional rate and offers subsidies for the accumulation of capital assets.
    • Tax exemption: Various state governments grant tax exemption/ tax holidays to the industries. Thus, the industries are exempted from paying taxes for initial 5 to 10 years. They even get the benefit of tax allowable depreciation on some capital assets. Tax in the form of octroi has also been abolished. Government also gives exemption from payment of sales tax.
Last Edited: January 27, 2022