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Small Business

Q. Distinguish between small scale unit and large scale unit.






It is labour intensive

It is capital intensive


It uses family labour

It hires labour


It produces small quantity

It produces large quantity


It uses small machines

It uses big machines and modern technology


Its capital is up to one Crore

Its capital increases more than one Crore


Q. Describe the role of small scale industries in rural India.

Ans.  Small scale industry has played crucial role in rural India :

i.       Small scale industries provide employment opportunities for the weaker sections of the societies.

ii.     Development of small scale industries in rural areas prevents migration of the rural people to urban areas.

iii.    Small business mobilises unutilised savings of people in villages and uses them in productive activities.

iv.   Small business in rural areas reduces the inequality of income between rural and urban areas.

v.     Small scale industries improve the standard of living.

vi.    Small business utilises local resources.

vii. It provides multiple income resources.


Q. How do small scale industries contribute to socio economic development of India?

Ans.  Indian society has various problems like unemployment, scarcity of capital, unbalanced regional development, economic inequality etc. Small scale industries help in solving these problems and help in the socio- economic development.

                    I.         Small scale industries are labour intensive and provide employment to large number of people in rural areas where large industries cannot be set up.

                  II.         Small scale industries prevent concentration of economic power and lead to wide dispersal of income.

                III.         Small scale industries facilitate regional balanced development by setting up industries in rural areas.

                IV.         Small scale industries use entrepreneurial abilities and unutilised savings of people in remote areas.

                  V.         Small scale industries provide valuable support to large scale industries by supplying them necessary inputs or distributing the final output.


Q. Describe briefly the various institutions setup for the promotion of small and rural industries.

Ans.  The various institutions setup for the promotion of small and rural industry :

                    I.         National Bank of Agriculture and rural development (NABARD)-It supports small and rural industries by offering credit facilities, counseling and consultancy services and organising training programs.

                  II.         Rural Small Business Development (RSBDC)-It provides management and technical support to small entrepreneurs in rural areas.

                III.         Small Industries Development bank of India (SIDBI) -It provides direct and indirect assistance to meet credit needs of small business organisations.

                IV.         National Commission for enterprises in the unorganized sector (NCEUS) - It helps in improving the productivity of small enterprises, to enhance the competitiveness and to provide facilities in the areas of credit technology and raw material.

                  V.         Rural and Women Entrepreneurship Development (RWED) - It creates a business environment to encourage initiatives of rural people. Women entrepreneurs provide training and advisory services.

                VI.         District industry Centers (DICs)- It provides integrated administrative framework at district level. It provides all the services and support facilities to the entrepreneurs for setting up small industries.


Q.   Discuss the problems of small scale industries.

Ans.  These are the problems faced by small scale industries:

                     I.         Raw Materials: Small scale industries do not get the raw materials at reasonable price. They cannot afford to store the material.

                    II.         Finance: Small scale industries are generally sole proprietary concerns hence their capacity to raise finance is limited. They do not get cheaper credit facilities so they depend upon their private resources.

                  III.         Managerial skills: The owners of small business do not possess managerial skills. They cannot afford to hire professionals.

                  IV.         Technology: The techniques for production used by small scale industries are outdated which result in higher unit cost of production and lower quality.

                   V.         Marketing: Small scale industries do not have marketing skills to sell their product. Their capacity to spend on advertisement is very low.

                  VI.         Labour: Small scale industries don’t have capacity to hire employees and skilled people because they cannot afford to pay. There is lack of specialisation.

                VII.         Quality: Small business cannot invest in research so generally their quality is poor due to indigenous technology.

               VIII.         Capacity utilisation: Generally half of the capacity is not utilised due to inadequate supply of raw material power labour and shortage of demand.

                  IX.         Competition: The products of small business cannot withstand in front of productsof large industries.

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