Business Studies Chapter 9 Solutions NCERT Class 11th
EXERCISES
Very Short Answer Questions
1. Which year the MSMED Act passed?
Answer: 2006.
2. What is the micro enterprise?
Answer: A micro enterprise has an investment up to ₹1 crore and a turnover up to ₹5 crore.
3. What is a cottage industry?
Answer: A cottage industry is a rural or traditional business not defined by capital investment.
4. What is meant by Village and Khadi Industry?
Answer:
Village Industry: A Village Industry operates in rural areas with capital per worker set by the government.
Khadi Industry: Khadi Industry produces hand-spun, hand-woven fabric.
5. Give any two characteristics of entrepreneurship development.
Answer: Systematic activity; Innovation.
Short Answer Questions
1. What is MSME?
Answer: MSME stands for Micro, Small, and Medium Enterprises. They are businesses classified by investment and turnover, crucial for India’s economic development, impacting production, employment, and exports.
2. State the meaning of entrepreneurship?
Answer: Entrepreneurship is creating and running one’s own business, involving identifying opportunities, mobilizing resources, and taking calculated risks to generate value.
3. MSME and Entrepreneurship are connected. Do you agree. Give two reasons.
Answer: Yes, they are strongly connected.
- Opportunities: MSMEs offer platforms for individuals to start businesses with low capital.
- Growth Drivers: Entrepreneurship leads to new MSMEs, boosting job creation and economic growth.
4. State the role of MSME in development of a country?
Answer: MSMEs contribute to national development by fostering balanced regional growth, being the second-largest employer (after agriculture), and providing a diverse range of products.
5. What are the different parameters used to measure the size of MSME?
Answer: The size of MSMEs in India is measured by two main parameters: Investment in Plant and Machinery and Turnover.
6. State the meaning of Village and Khadi industries?
Answer:
- Village Industry: A rural industry producing goods or services, with per-head capital investment periodically specified by the central government.
- Khadi Industry: A segment of the MSME sector focused on hand-spun, hand-woven fabric.
7. State any three major problems faced by MSMEs?
Answer: Three major problems faced by MSMEs are:
- Finance: Inadequate capital, poor credit access, reliance on informal lenders, and working capital issues from delayed payments.
- Raw Materials: Difficulties in procurement, leading to quality compromises, high prices for small quantities, and storage limitations.
- Marketing: Weak marketing due to dependence on middlemen (exploitation) and lack of infrastructure for direct sales.
Long Answer Questions
1. How do small scale industries contribute to the socio-economic development of India? Discuss
Answer: Small-scale industries (MSMEs) significantly contribute to India’s socio-economic development. They are major employment generators, second only to agriculture, providing jobs especially in rural and backward areas and curbing urban migration. They promote balanced regional development by establishing industries in diverse locations, utilizing local resources and skills efficiently. This helps reduce income inequalities by distributing economic benefits more widely. MSMEs also diversify the industrial base by producing a vast array of goods and foster a strong entrepreneurial culture. They serve as ancillary units to large industries, strengthening the overall industrial value chain.
2. Describe the role of small business in rural India.
Answer: Small businesses, primarily MSMEs, play a crucial role in rural India’s development. They are vital for creating non-agricultural employment in rural areas, absorbing surplus labor and reducing urban migration pressure. This directly contributes to poverty alleviation and improved living standards. Rural small businesses effectively utilize local resources, traditional crafts, and indigenous skills, minimizing external dependency. They foster entrepreneurship by offering accessible venture opportunities. By establishing operations in remote areas, they ensure balanced regional development. Additionally, they supply essential goods and services locally, promoting self-sufficiency, and are key to preserving traditional skills and cultural heritage.
3. Discuss the problems faced by small scale industries.
Answer: Small scale industries (MSMEs) encounter several significant problems. Finance is a major hurdle; they often have limited capital, struggle for working capital due to delayed payments, lack formal creditworthiness, and depend on high-interest local lenders. Raw material procurement is difficult, leading to quality compromises, high prices for small purchases, and production capacity waste during scarcity. They typically suffer from a lack of managerial skills, as founders often manage all functions and cannot afford professional managers. Marketing is weak, forcing reliance on exploitative middlemen and hindering direct market access due to inadequate infrastructure. Many prioritize cost over quality, lacking resources for R&D and technology upgrades, impacting global competitiveness. Underutilization of capacity due to weak demand increases costs, leading to business sickness. Lastly, they face intense global competition from larger domestic and multinational corporations.
4. What measures has the government taken to solve the problem of finance and marketing in the small scale sector?
Answer: The government has implemented various measures to address financial and marketing challenges in the small-scale (MSME) sector.
- For Finance: Measures include Priority Sector Lending by commercial banks, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for collateral-free loans, Mudra Yojana providing small loans (Shishu, Kishor, Tarun), and the role of SIDBI for financing and development. Interest subvention schemes and the Trade Receivables Discounting System (TReDS) also aim to improve credit access and liquidity.
- For Marketing: Initiatives include a Public Procurement Policy mandating government purchases from MSMEs (25% target), National Small Industries Corporation (NSIC) providing marketing support, the GeM (Government e-Marketplace) for online government procurement, and the Marketing Assistance and Technology Upgradation (MATU) Scheme. Cluster development programs and digital marketing support are also in place to enhance market reach.
5. ‘Innovation is integral to MSME’. Discuss giving reasons to your answer.
Answer: The statement “Innovation is integral to MSME” is highly accurate because innovation is essential for their survival, growth, and competitiveness.
- Competitive Edge: Innovation in products, processes, or business models allows MSMEs to differentiate themselves from larger rivals and capture market share.
- Problem Solving: It enables MSMEs to develop unique solutions to specific market needs or customer pain points.
- Cost Reduction & Efficiency: Process innovation helps optimize operations, reduce costs, and improve productivity, crucial for profitability.
- Market Expansion: Innovative offerings can open new market segments or entirely new markets, increasing revenue potential.
- Adaptability: Innovation allows MSMEs to quickly adapt to changing market trends, technologies, and consumer preferences, ensuring long-term viability.
- Value Creation: By continuously innovating, MSMEs offer enhanced value propositions to customers, fostering loyalty and stronger pricing power.
- Brand Building: Unique innovations help MSMEs build a strong brand identity and reputation, standing out without extensive marketing budgets.
6. ‘Creativity and Innovation is the key to MSME’. Justify the statement.
Answer: The statement “Creativity and Innovation is the key to MSME” is fully justified as these elements are fundamental for an MSME’s existence, growth, and sustained competitive advantage.
- Creativity as the Origin: Creativity is the initial spark—the ability to generate new and original ideas, spotting unmet market needs or envisioning new products/processes. With limited resources, creativity allows MSMEs to be resourceful and find unconventional solutions.
- Innovation as the Realization: Innovation is the practical execution of these creative ideas, transforming them into tangible products, services, processes, or business models that create real value. Without innovation, creativity remains dormant.
- Competitive Differentiation: Innovation allows MSMEs to differentiate their offerings, making them unique or superior to competitors, which is vital when competing with larger enterprises.
- Market Responsiveness: Innovation enables MSMEs to quickly adapt to evolving market demands, technological shifts, and changing consumer preferences, crucial for long-term relevance.
- Efficiency & Cost Optimization: Process innovations can lead to significant operational improvements, cost reductions, and increased productivity, directly impacting profitability.
- New Opportunities: Innovative products or services can open up entirely new markets or customer segments, providing fresh avenues for growth.
- Brand and Reputation: Consistent creativity and innovation help MSMEs build a reputation for quality and forward-thinking, fostering strong brand identity and customer loyalty. In essence, creativity provides the vision, and innovation provides the means to achieve it, making them indispensable for MSMEs to thrive and contribute economically.