26661470 Rural Entrepreneurship in India

8/19/2019 26661470 Rural Entrepreneurship in India

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RURAL ENTREPRENEURSHIP IN INDIA

1. INTRODUCTION TO RURAL ENTREPRENEURSHIP

ENTREPRENEUR -

“Entrepreneurs” are people who create and grow enterprises.

“Entrepreneurship” is the process through which entrepreneurs create and grow enterprises.

“Entrepreneurship development” refers to the infrastructure of public and private policies and practices that foster and support entrepreneurship.

ENTREPRENEURSHIP -

The concept of entrepreneurship has a wide range of meanings. On the one extreme an

entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population. On the other extreme ofdefinitions, anyone who wants to work for himself or herself is considered to be anentrepreneur.

The word entrepreneur originates from the rench word, entreprendre, which means !toundertake.! "n a business context, it means to start a business. The #erriam$%ebster&ictionary presents the definition of an entrepreneur as one who organi'es, manages, andassumes the risks of a business or enterprise.

WHAT IS RURAL ENTREPRENEURSHIP?

The problem is essentially lop$sided development which is development of one area at thecost of development of some other place, with concomitant associated problems of underdevelopment. or instance, we have seen unemployment or underemployment in the villagesthat has led to influx of rural population to the cities. %hat is needed is to create a situation sothat the migration from rural areas to urban areas comes down. #igration per se is not alwaysundesirable but it should be the minimum as far as employment is concerned. (ather thesituation should be such that people should find it worthwhile to shift themselves from townsand cities to rural areas because of reali'ation of better opportunities there. "n other words,migration from rural areas should not only get checked but overpopulated towns and citiesshould also get decongested. The )uestion is, is it really possible* "f it is so, ways can always

be found out. One is by forcibly stopping villagers from settling in the slums of towns andcities, making use of all powers to clear the slums so the villagers are forced to go back. +utsuch practices have not achieved the desired results in the past. part from causing sufferingto the poor people and adding to the expenditure for the -overnment, social tensions andeconomic hardships created by the government officials and their staff in every demolition ofslums is not desirable from a sane government. #oreover, when a slum is demolished peopledo not move out of urban locality. They only relocate to a nearby place because they areentrenched in the economy of the town or city. Though governments have tried out variousschemes for generating incomes in the rural areas such government initiatives have notstopped people from moving out of villages to cities. This is because such governmentinitiatives are not on their own capable of enabling people to earn ade)uately and amelioratetheir conditions. There has to be some committed enterprising individual or a group of people


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Constraints o Potentia! Rura! Entrepreneurs an" De#e!op$ent Inputs

Sr. No.

ConstraintsInputs

3.7ow self$image and confidence.#otivational inputs, unfree'ing and

experience sharing by successful local

entrepreneurs.8.

/o faith on others includes friends.-roup building experiences.

%.

/o exposure to industry9business.ield visit to factories and big markets.

:.%ho to contact for starting a venture,"nformation inputs on procedures and

what formalities and procedures are toformalities.

be followed*

5.

;ow to know whether the identifiedOpportunity identification and

business is a viable and soundguidance.

proposition*


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;ow to know whether the identified#arket survey, pro0ect report

business is a viable and sound preparation.

proposition*

=.;ow does one carry out bank Training in simple banking procedures

operations*like filing up deposit and withdrawal

slip etc.&.

;ow to manage the business*+asic management orientation through

simulation exercises.

>.;ow to read and write accounts*unctional and numerical literacy.

imple accounting in terms of writing

income and expenditure.34.lmost no technical skillsTechnical training ?on$the$0ob training@.


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'. T(PES O) RURAL ENTREPRENEURSHIP

(ural entrepreneurial activity can be broadly classified in four types such asA

In"i#i"ua! Entrepreneurship $ "t is basically called proprietary i.e. single ownership of theenterprise.

*roup Entrepreneurship $ "t mainly covers partnership, private limited company and publiclimited company.

C!uster )or$ation $ "t covers /-OsB, COsB, D+OsB, ;-sB and even networking of thesegroups. These also cover formal and non$formal association of a group of individualson the basis of caste, occupation, income, etc.

iv@ Cooperati#es $ "t is an autonomous association of persons united voluntarily for a

common ob0ective.

n entrepreneur has to decide on a particular type of entrepreneurship based on the variousoptions available.

1+ INDI,IDUAL ENTREPRENEURSHIPPROPRIETORSHIP

"n this it is the entrepreneur who is the only ?3445@ owner. The entrepreneur bears fullresponsibility for each and every activity and is alone the strategic thinker and decision maker to make the unit viable as well as profitable. There is hardly any difference between personalassets and business assets. The entrepreneur has !unlimited liability under the law!.

This type of entrepreneurship is )uite prevalent in rural areas where an entrepreneur haslimited resources.

'+ *ROUP ENTREPRENEURSHIP

"t is classified into mainly three types such as i@ Fartnership ii@ Frivate 7imited Dompany andiii@ Fublic 7imited Dompany.

Partnership

"n this case there is no individual ownership of the unit. There is another partner with you

who works with you and also bears the responsibility and shares profit. 7ike proprietorship,the liability is !Goint and everal!. or partnership type of entrepreneurship, mutual trust is amust. +esides both the partners in partnership must understand their respectiveresponsibilities and complement each other for common ob0ectives and goal.

The characteristics of partnership are a@ association of two or more persons ?maximumtwenty@, b@ contractual relationA c@ lawful business, d@ sharing of profit, e@ agencyrelationship, f@ unlimited liability and g@ non$transferability of interest.

The re)uirements of ideal partnership are good faith, common approach, written agreement,registration, ade)uate capital, skills and stability. Fartnership is governed by "ndianFartnership ct, 3>H8.


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The merits of partnership are ease of formation, large resources, and combined abilities and 0udgment, flexibility, )uick decisions, cautions operations, survival capacity, better humanand public relations, improved chances of growth and protection of minority interest.The demerits could be lack of harmony, divided authority, instability of business, lack of

public confidence, risk of implied authority, unlimited liability, non$transferability of interest

and social losses.

Pri#ate Li$ite" Co$pan

"n this case the shareholders are the owners. There must be a minimum of 8 ?two@shareholders. The "ndian law allows maximum of I4 ?fifty@ shareholders. The liability islimited in this case. s such if the company goes bankrupt then no one has to part with one1sother personal assets to meet the obligation of the creditors.

+eing a private limited company, one can raise far less money than a public limited company.+ut there is better control as the number of shareholders is few besides they may be your kithand kin. #any provisions of Dompany 7aw are not applicable to private limited companies.There is much less paperwork too. Dompanies are governed by Dompanies ct, 3>I


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iv@ These are formal organi'ations with rules, regulations and procedures with professionalmanagement.

,O2s

These are voluntary agencies initiated by individual for welfare and development. They may or may

not be registered under any appropriate ct. -enerally these are registered under any appropriate ctlike ocieties (egistration ct, 3J


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%.TRENDS IN RURAL ENTREPRENEURSHIP

There are large number of products and service in rural areas, which can be leveraged byentrepreneurs to set up new small and micro enterprises. "n fact entrepreneurship can be pursued invirtually any economic field. The idea here is to make the readers aware of the linkages between

various economic activities within a particular category in the "ndian context. The following indicativesectors may be taken into consideration for gainful employmentA

Original enterprises created out of opportunities in supplying rural products to urban consumers andnew products to rural consumers.(eplication of urban experiences in (ural etting.

Rura! Entrepreneurship in In"ia

One of the main aims of development policy in "ndia is to provide employment to millions ofunemployed rural youth. "ndia1s rural economy is primarily agricultural based, but the rapid rise in its

population with conse)uent pressure on land has led the planners to lay greater emphasis on industrialdevelopment. The core of the problem in countries like "ndia is surplus agricultural labour and closureof traditional village industries, resulting in unemployment in rural areas and movement or, migrationof rural youth to urban area in search of 0obs thus putting more pressure on the urban infrastructureand amenities.

(ural industries generated employment for :=.>= lacs persons in the year 3>>= as against H=.83lacs persons in the year 3>>8$>H. Of late, gro based industries have generated several employmentopportunities to rural people.

In0o$e an" E$p!o$ent Potentia!

"ndustries in rural area, which are mostly micro or tiny in structure, are )uick yielding. "n other wordstheir gestation period is much less as compared to large$scale industries. (ural industries are labourintensive and provide large employment opportunities to rural folks of all age groups. Khadi andCillage "ndustries Dommission at national level and Khadi Cilliage "ndustries +oard at tate levelhave played a pivotal role in this context

.

The village and small$scale industries was set$up with the following aimsA

to orient the rural population specially the rural youth towards entrepreneurship

to increase the levels of earnings of artisans in rural areas

to sustain and create avenues of self$employment among the unemployed youthto ensure regular supply of goods and services through use of local skills

to develop entrepreneurship in combination with improved methods of production through appropriatetraining and package of incentivesto preserve craftsmanship and art heritage of the country.

)oo" Pro0essin5

ood processing covers variety of products from various sectors comprising agriculture, horticulture, plantation, animal husbandry and fisheries L marine products. "ndia is one of the ma0or food producers in the world and has enough availability of a wide variety of food$grains, fruits, vegetables,


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flowers, livestock, poultry, fish and seafood. &iverse climatic conditions and a long coastline hascontributed to "ndia1s position as a large food producer with variety. ;owever, the food processingindustry is still a low$key affair and only two

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percent of fruits and vegetables and 3I per cent of the milk produced are processed in theindustries as a whole.

The processed food industry, which ranks fifth in si'e in the country, represents


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individually or in combination. The sweetening agents are added to the preparation. is a popularitem and has potential both in internal as well as export markets.

The main production areas of Dhikki are 7onawala L Khandala in #aharashtra which are locatedon the #umbai$Fune highway. "n this area several smallscale units produce Dhikki with over 344

varieties which are of very high )uality products.

Pou!tr In"ustr

Foultry farming is one of the fastest growing industries in "ndia. "t is )uite profitable andcan be managed by persons of all ages from all walks of life in all sections of the country."t may be conducted as an exclusive business or as a side business for additional income.

The /ational Dommission of griculture states that poultry farming has certain special trategies and Experiences features, which favour its large$scale adoption by small and marginal farmers and agricultural labourers. 7and re)uired for poultry farming is small the

capital investment for starting small poultry units is less. Foultry farming can be started on asmall scale and can be expanded gradually. "t does not re)uire heavy investment and the rawmaterials are easily available. lso short$term training facilities are available and evenuneducated people could set up poultry farms. Frofits are earned much sooner than most other farm products.

ome of the advantages of poultry keeping areAupplies nutritious food for the people.erves as hobby and sport for some people.(e)uires less capital to start a poultry unit and gives good and )uick

/eeds little space and can be done in phases.

%ater re)uirement is less as compared to crop cultivation or farming.%aste products like bran and substandard grains can be utili'ed.Eradicates garden pests such as caterpillars, insects and snails.-ives rich fertili'er for crop cultivation especially for vegetable gardens.

Foultry feathers are useful in many ways."t is a favourable side business to agriculture.-ives income throughout the year.

/ot much labour is involved and generates self$employment.upports many ancillary units.Easy to manage, even women and children can look after them.

ome medicines and tonics are obtained from poultry as by$products.

Fresently it is a well$organised agro$industry where people with limited or ade)uate financescan start commercial poultry farming.

Cotta5e an" Han"i0rats In"ustr

Dottage industries are those industries run within the residences of the artisans by family members

without any hired labour, with the use of locally available raw materials and by making little capid

investment. The ma0or industrial activities in this scheme include pot making, match making,ghani oil extraction, bee$keeping, bamboo cane works, basket$making, korai mat weaving, stone

weaving items, clay folks.


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Oi! In"ustrThe vegetable oils are essential ingredients of food needed for the growth and maintenance of human body. Drushing of oil seeds to obtain edible oil for human consumption has

been an age$old village industry in "ndia. The Te!is have been an important component of the villagesociety. Either they have been crushing oil$seeds procured by them or providing oil extraction serviceto oil$seed producers. This provides nutritious oil with natural flavour and taste.

The village oil industry employs lakhs of artisans in rural areas. This industry renders service to thesociety in two$ways it supplies fresh, flavoured and nutritious oil to the consumers on the one handand provides employment to the traditional artisans and others unemployed, on the other.

"n order to increase the production of oil, all sources of e)uipment must be utili'ed ince Ghani is a

simple machine, which needs low capital and small )uantity of raw materials, it must be encouraged.

PotterThe pottery is traditional industry of rural "ndia. "n fact it is age$old industry where the pottery

products are used within rural "ndia by rural folks for cooking ?;andi@, storing water ?#atka L urai@

and crockery and cutlery in the form of Kullar, etc.

The urban "ndians are using the pottery products for plants, very special kitchen items made up ofchina clay for serving tea, coffee, clay bowels for preparing curds and serving food.


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RECENT TRENDS IN SER,ICEO) SECTOR RURAL ENTERPRISEThe service sector enterprises are generally more successful, no matter whether co$operating in ruralor urban areas. %hat is more important is identification of the nature of need based services related

business activity.

Repair o Phoneo/i!e Phone7 E!e0troni0 an" E!e0tri0a! 5oo"s

%ith "ndustrial growth and revolution in communication industry especially in the field of electronic

media all over, the rural "ndia is also using TC, radio particularly for various # stations available inlocal and regional language, cable network, land line and mobile phones. The various service

providers have opened a range of self$employment opportunities to rural educated youth who have thecompetence and9or are willing to work or start their own enterprise in the area of service needs of rural"ndia.

elf$employment oriented training programmes to start an enterprise with small investment are easilyavailable to rural youth through various training institutes which do not re)uire high level ofeducational )ualifications. "t rather re)uires the necessary skill and basic aptitude to learn andunderstand the skill.

ervice in this sector varies from opening of a shop as sales outlet, a service outlet, outlet foraccessories or an outlet of the main service provided vendors specially mobile phone companies.

This area covers large number of activities in rural "ndia where youth can undertake the activity ofhigher taste. This being a purely service oriented sector, a person with good interpersonal relations and)ualities will win over the business competition, which in any case is basic re)uirement to become asuccessful entrepreneur.

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Rura! Touris$

"ndia is one of the oldest, culturally richest and diverse country full of colour and boasts of acivili'ation with rich flora and fauna. Our cuisine is mouth watering, scenic beauty is

breathtaking, folk dances are simply enchanting and wide array of places of tourist attraction -

from the valleys of ;imachal Fradesh, hills of 6ttranchal, plains of the river -ang5 forests of /orth East, or plateau of outh "ndia, "n other words, "ndia is simply full of diversity and that is

why the latest blit' of the -overnment terms her as Incredible India.

/early two$third "ndians live in villages in fact our roots are located in rural "ndia. #oreovermost of tourist sites are located away from the urban centres towards rural "ndia and the trend isalso shifting towards the rural areas. There is wealth of craft performing art, vivid lifestyle and

cultural diversity obtaining in rural "ndia.

Entertain$ent

"n the absence of leisure time +s well as purchasing power, the rural folks are generally devoid ofthe entertainment which everyone needs for rest and relaxation. %ith the reach of electronic mediathe rural youth has developed a taste towards music, dance, acting, etc. in addition to traditionalsongs, folk dances, cultural activities, traditional games and sports which can be used as source ofrevenue generation. This type of service can be provided either by an individual having goodfinancial background or by a small group rendering and promoting such activities and services inrural "ndia on various occasions such as social functions, C"F visits, etc.

uch events are attracting not only the domestic tourist but international tourist also is now keento observe "ndian customs, culture and costumes thus becoming a very good source of income forthe rural unemployed youth.

o"ern In"ustries

%ith the -overnment efforts to extend the development initiatives to rural "ndia especially indeveloping tates, the #odem industries are being given special packages and relief with tax

benefits for setting up the industries at a subsidi'ed cost with the aim to provide 0ob opportunities,infrastructure development in terms of road, power, water supply, e t T.h is, in conse)uence,leads to overall increase in the living standards of local people where the modem industries are

being set up by various national and international companies. s a matter of policy, the industriesare being asked to shift from the large townships like metros especially to decongest and lessenthe burden on the urban centres.

These industries offer great opportunities of varied nature of 0obs for local youth who are educatedand are willing take challenging assignments, whether wage$employment or self$employmenttype. The employment opportunities are basically based on )ualifications, skills and expertisewhile self$employment opportunities or indirect employment opportunities are based on thevarious types of industry related trade or service activities which the rural youth can undertakeand be gainfully employed.

#odern industry is now playing very important role ever since globali'ation and liberali'ation

policy of -overnment came into existence and it has definitely helped the rural youth in findingsuitable vocation.


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4. PLANNIN* A RURAL ENTERPRISE

Flanning is the foremost function in decision making to set up a rural enterprise. Fro0ect planning aimsat formulation of all the future pro0ect activities well in advance, determine the )uantum of resourcesre)uired for the purpose and coordinate various activities to complete the activities as per schedule at

the right time. The first and foremost step to initiate the planning process is the identification of asuitable pro0ect followed by information accessibility, market assessment, preparation of feasibilityreport, etc. +esides, one has to know the registration procedure of the enterprise and various legalaspects of business.

PRO8ECT IDENTI)ICATION

or identifying a new pro0ect, there are many institutions9agencies such as Entrepreneurship&evelopment "nstitutes ?E&"s@9Denters, mall "ndustries ervice "nstitute ?""@, TechnicalDonsultancy Organi'ations ?TDOs@, etc. at tate level and &istrict "ndustries Denters ?&"Ds@, privateconsultancy organi'ations, etc. usually located at the district head)uarter or in a nearby town which

can provide effective counseling services in planning the enterprise and also in the subse)uentactivities.

Once one decides to set up own business, one has a wide choice before her9him. "n other words, onehas a choice of starting P

#anufacturing unit $ etting up an industry means one has to organi'e many things like planning,arranging for technical know$how, buying and installing machinery, building a factory, managingseveral departments like production, sales, )uality control, personnel and administration, finance andso on and so forth.

Trading $ Trading involves planning, purchase, sale, stock control and financial management. retail

grocery shop, compared to an industry, is a simpler business. large departmental store, however, isnot so simple.

ervice enterprise $ service enterprise can either be simple or complex. or instance, setting up a photocopying centre and managing it may be simple but inspection of offshore oil$gas lines is a rathercomplex business.

To set up an industry or a service enterprise, one can start an enterprise in sectors like chemical, pharmaceuticals, basic metal industries, metal products, machinery other than electrical machinery,electrical machinery, electronics, transport e)uipments, textile, rubber, plastic, food, mineral$basedindustries, ceramics, agro$based but non$food industries ?e.g. making bri)uette from agriculturalwaste@, paper, or glass.

IN)ORATION ACCESSI3ILIT(

One needs various types of information about several aspects such as opportunities, market,technology, finance, policies, location, etc. The different sources of information could beA

imilar enterprise owners9producers

(aw materials suppliers

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#achineries suppliers

Facking materials suppliers

Dustomers

&ealers

Donsultants

Employees of similar enterprises

+ank officials

Fromotional agency and regulatory agency officials

ssociation of similar product?s@ manufacturers and so on.

Inor$ation on 3usiness I"eas $ There are numerous directories, handbooks and databases published bythe -ovt. of "ndia, ssociations and other agencies for obtaining information on opportunities.

These are information in the following formsA

easibility studies

Fro0ect profiles

"ndustry studies

rea development studies

The organi'ations in possession of information on business opportunities are areA

&istrict "ndustry Dentres ?&"D@ $ ?one in each district@

Technical Donsultancy Organi'ations ?TDO@ $ ?one each in most tates@

Dentres for Entrepreneurship &evelopment ?one each in many tates@

mall "ndustry ervice "nstitutes ?""@ ?one in each of many large cities@

7ead +ank ?one in each district@

"ndustrial Extension +ureaus ?these exist in several tates@ and are known as "/&EQT+, 6dyog#itra, 6dyog ahay and so on@.

/ational "ndustrial &evelopment Dorporation ?/"&D@, /ew &elhi

Khadi and Cillage "ndustries Dommission ?KC"D@


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Dommissioner of Dottage "ndustries ?one in each tate@

Entrepreneurship &evelopment "nstitute of "ndia ?E&"@, hmedabad

/ational "nstitute of Entrepreneurship and mall +usiness &evelopment ?/"E+6&@, /ew &elhi

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/ational "nstitute of mall "ndustry Extension and Training, ;yderabad

mall "ndustries &evelopment +ank of "ndia ?7&+"@, 7ucknow

"ndustrial Donsultancy irms

I"eas

n ability of a business idea among various alternatives being considered is a must. The key )uestionsin settling down to a viable business idea are as underA

6ses9applications of the product or service

Fossible scales of production or operation for which economies of scale is to be looked into

"nvestment for a given scale and the sources of funds and related expenses there on

#arket prospects

6nit sale price

Technical arrangements

Expected annual turnover

Expected profit and break$even analysis

uccess determinants, etc.

Capita! Or5ani9ation

Dapital is the prime re)uirement for any pro0ect. Term lending institutions such as tate inancialDorporations ?Ds@, tate "ndustrial &evelopment Dorporations ?"&Ds@, tate "ndustrial "nvestmentDorporations ?""Ds@, Dommercial +anks, etc. are the prime sources for meeting the pro0ect cost suchas A

7and cost and land development charges,

Donstruction of buildings,

Furchase of plant and machinery,

c)uiring technical know$how,

Frocuring miscellaneous fixed assets,

#argin of working capital,

Dontingencies, etc.

%hile sanctioning loans, the financial institutions consider the credit worthiness of the pro0ect besidethe payback capacity of the pro0ect. ;ence assessment of financial viability is a must before releasing


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the funds.

Support Sste$

"nformation about support system is a must for an enterprise. "n short$term it is the information whichhelps in$sound decision making. The information could be on infrastructure facilities, incentivesavailable, financial tie$ups, availability of raw materials, tax concessions, etc.

"nformation on various infrastructure facilities such as availability of land, power, and water, facilitiesfor effluents or wastes disposal should be available from the &istrict "ndustries Dentre of the &istrictor from the concerned tate &irectorate of "ndustries. or financial tie$ups the tate inancialDorporation and its branches which are located at various districts of the tate can effectively guide.

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Even commercial banks of the locality could be approached. lso proper analysis has to be done bycomparing relevant facts and figures so that the best term or package is available to the entrepreneur.

There are tax concessions and other allowances available from time to time by the Dentral-overnment or the concerned tate -overnments in the form of tax holidays, sales tax incentives, etc.

for which the concerned &istrict "ndustry Dentre ?&"D@ shall guide. They can also advise as to how tomeet various provisions of income tax, sales tax, excise duty, etc. depending upon the nature of the

product.

AR:ET ASSESSENT

or sound market assessment three things are important such as P

nalysis of #arket &emand

#arket demand for a product is the total volume that would be bought by a defined customer group, ina defined geographical area, in a defined time period, in a defined marketing environment, under adefined marketing programme. ;ence, there are eight elements of variables which must be analy'ed inorder to determine market demand.

The Dompetition

or a particular product of different brands, the competitive situation could be assessed by analy'ingthe market share, price, product features, product age, discount to dealers, credit terms, ma0orcustomers, etc. of a brand vis$a$vis the other.

Trading Fractices

n Entrepreneur must try to understand the trade practices that are relevant to her9his product. Theintermediaries in the channel, prevailing sales tax, legal implications, etc. have to be understood

properly for assessing market.

"n selection of a product of service, there is the need to analy'e the market through primary andsecondary data. These data can help to assess the current demand, the forecast and the potential of a

particular product or service besides the opportunities and risks available to it.

Frimary &ata L econdary &ata

"t is the information which is collected first $hand through field work or survey by various methods

such as Ruestionnaires, Fersonal "nterviews, etc. There are various methods of collecting primary datai.e. observation method, experiment method and survey method.

econdary &ataA "nformation which already exists in documented form. uch sources can be P

nnual reports of the companies

Trade publication and records

7ibraries and trade information centers

&irectories of manufacturers


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/ewspaper, business maga'ines, etc.

-ovt. publications ?e.g. &D" profiles@

&ata agencies, consultancy firms, etc.

"nformation from dealers, various agencies

ar6et Resear0h ;R<

"t helps to collect primary data. The more accurate and fresh the data, the greater are the benefits. Themerican #arketing ssociation defines marketing research as !The systematic gathering, recordingand analy'ing of data about problems related to the marketing of goods and services!.

There are five steps in marketing research process which areA

Froblem definition

(esearch design

ield work&ata analysis

(eport presentation and implementation

)EASI3ILIT( REPORT

"t is very essential to prepare a feasibility report covering all the activities and the resources neededfor the pro0ect. The feasibility report broadly contains the followingA

The background of the entrepreneur i.e. the educational background, family background and professional exposure

#arket potential and marketing strategy

election of location of the pro0ect which should be on the basis of proximity to the source of rawmaterials and9or markets, availabilities of labour, infrastructural facilities, incentives, etc.

(e)uirements of land and building. "t is to be ensured that the land is free from any legalencumbrances

(e)uirement of plant and machinery including their installation

#anufacturing process

(e)uirements of utilities such as water and electricity

(e)uirements of raw materials and sources of supply

Estimated cost of the pro0ect


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#eans of finance

Dost of production, taxes and profitability

h@ +reak$even point

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Dash flow statement

"nternal rate of return and

Economic viability

feasibility report must provide a base$technical, economic and commercial$for an investmentdecision on any industry9entrepreneurial pro0ect. "t should define and analy'e the critical elements thatrelate to the production of a given product together with alternative approaches to such production.uch a report should provide a pro0ect of a defined production capacity at a selected location, using a

particular technology or technologies in relation to defined materials and inputs, at identifiedinvestment and production costs, and sales revenues yielding a defined return on investment. "t mustconsider all aspects of business right from pro0ect background and history, location and site toconclusion covering its advantages, drawbacks and implementation of the pro0ect.

RE*ISTRATION PROCEDURE

s a small$scale unit it should be registered with the &istrict "ndustries Dentre ?&"D@ of the district inwhich pro0ect is to be proposed to be located. "t has to obtain /o Ob0ection Dertificate from the tateFollution Dontrol +oard. &epending upon the nature of the product or service, it has to be registeredfor ales Tax, ervice Tax, and other statutory purposes.

LE*AL ASPECTS O) 3USINESS

n entrepreneur must be aware of various legal and statutory obligations affecting labour relatedregulations of the business. These are covered under various cts9legislations as under the actoriesct, 3>:J "ndustrial &isputes ct, 3>:= social legislations and wage legislations.

1. The )a0tories A0t7 1=4&

This ct is applicable where the number of employees is ten or more and where power is used andtwenty or more where power is not used. 6nder this ct the entrepreneur has to take necessarymeasures for health, safety and welfare of the workers as per the ct besides taking necessary

precautionary measures against fire. urther, necessary records have to be maintained for workinghours, annual leaves, overtime, advances, wages, deductions, etc. The adherence to various provisionsof the ct shall be regulated by the Dhief "nspector of actories.

'. The In"ustria! Disputes A0t7 1=4>

Thus ct is applicable to every trade, business, service, etc. which is also considered as an industryunder this act. "ndustrial disputes are common in a workplace. uch disputes may arise betweenemployers and employees or among the employees. This dispute may be related to employment ornon$employment or terms of employment or the conditions of labour of any person. The uthoritiesunder the ct are %orks Dommittee, Donciliation Officer, +oard of Donciliation, and Dourts of"n)uiry, 7abour Dourt, "ndustry Tribunals and /ational Tribunal. n entrepreneur has to follownecessary procedures in case such a dispute arises.

%. So0ia! Le5is!ation

ocial security is a need for any employee. The Employees Frovident und and #iscellaneousFrovisions ct, 3>I8 are applicable to any establishment employing 84 or more employees. 6nder

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this ct, the minimum contribution payable by the employer towards provident fund is J.HH5 of thesalary. The employee has to make an e)ual contribution. The details and modalities could be obtainedfrom the (egional Frovident und Dommissioner. Carious other schemes which are covered under thisct are

a@ Employee amily Fension und and b@ &eposit 7inked "nsurance cheme.

4. Wa5e Le5is!ation

"t covers the following ctsA

Fayment of %ages ct, 3>H=8,

Fayment of +onus ct, 3>:J.

Fayment of %ages ct, 3>H< $ This ct is applicable to establishment where ten or more workers areemployed on any day of the preceding 38 months with the aid of power and twenty or more workerswithout the aid of power. %ages mean basic pay, dearness allowance, city compensatory allowance,overtime wages and production incentives. s per the norms, necessary registers for wages and otherrelated matters have to be maintained.

Fayment of -ratuity ct, 3>=8 $ "t is applicable in all establishments in which 34 or more persons areemployed. -ratuity shall be payable to an employee who has put in uninterrupted service for aminimum period of five years.

Fayment of +onus ct, 3>:J $ This is applicable in :: scheduled industries. +asic wages are fixed fordifferent industries and special allowances are announced by the labour commissioner every sixmonths. /ecessary registers have to be maintained.


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. HUAN RESOURCES )OR DE,ELOPIN* RURAL

ENTREPRENEURS

;uman (esources are amongst the most essential resources that are re)uired for fostering ruralentrepreneurship. The importance of human resources cannot be over emphasi'ed, for it is thisresource alone that makes the greatest impact on socioeconomic development of rural areas.

chievement motivation is a key to entrepreneurship development. This is achieved in many waysAchildhood reading, upbringing, exposure to challenging situations, self study, apprenticeship, coachingand training, all contribute to achievement motivation.

Trainin5 or Entrepreneurship De#e!op$ent

&evelopment of entrepreneurs through systematic training namely Entrepreneurship &evelopmentFrogrammes ?E&Fs@ has emerged as an important strategy for development of human resources for

promoting small business enterprises in rural areas. "ndia has come a long way since the idea of

creating an entrepreneur through training was first mooted over :4 years ago.

The focal point of all entrepreneurship development programmes is the entrepreneur, the person whomatters in the process of development. The entrepreneur should be seen in the social context and alsoin the context of the needs of rural societies. The conceptual framework of the development of ruralentrepreneurship should be made the starting point so that the various strategies used in developingentrepreneurs can be properly understood and planned.

Entrepreneurial motivation is the most important factor in contributing to the development ofentrepreneurship in a society. o, various aspects that help in developing achievement motivation needto be included in the E&F training courses. These skills have to be properly emphasi'ed.

"n order that the potential entrepreneurs succeed in their entrepreneurial ventures, they need to bethoroughly prepared, rather pained, to imbibe and nurture the key traits like taking initiative,

perseverance, self$ confidence, ability to identify and grab opportunities, information seeking ability, planning, problem solving, persuasive and influencing competencies, risk taking willingness, hardworking, )uality consciousness, sense of efficacy, openness to feedback, learning from experience,time orientation, concern for society, competition and collaboration, dignity of labour, respect forwork, need for independence and need for outstanding performance, etc.

/ormally the above traits or )ualities are not found in the ma0ority of rural people since they are notoriented to an entrepreneurial culture. The environment, in which they live, and the lack ofopportunities for entrepreneurial encounters, etc. restrict them. "t is, therefore, necessary to create an

atmosphere for promoting potential entrepreneurs. Entrepreneurship &evelopment Dentres being runin each tate, and national level institute like E&"", /""ET, /"E+6&, ""E&, "DED&, have designedseveral training courses for training potential entrepreneurs on various aspects of enterprisedevelopment. "n addition, several agricultural universities, research institutes, KC"D, Krishi CigyanKendras have provided ade)uate training opportunities on the sub0ect matter and technologies forenterprise development. (6&ET institutes also provide training for potential entrepreneurs underF#(2 scheme.

"n addition, the network of ""s located all over the country provides technical guidance and supportfor small enterprise development.

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Trainin5 an" De#e!op$ent o Rura! Entrepreneurs

brief sketch of the training and support programmes launched by the government is given to enable

the reader get a comprehensive view of the efforts of human resources development for ruralentrepreneurship.

Training of rural 2outh for elf Employment ?T(2E#@A

Training of (ural 2outh for elf Employment was launched by the -overnment of "ndia in 3>=> as afacilitating component of "ntegrated (ural &evelopment Frogramme ?"F&F@. "n this programme, theselected rural youth are put through a period of training, either with a training institution or a mastercraftsman to provide necessary technical and entrepreneurial skills. On completion of training, theidentified youth receive a combination of subsidy and institutional credit under "(&F for ac)uisitionof an income generating asset. The syllabus for each trade under T(2E# should include training in

0ob skills, as well as management skills. The latter may include elements of bookkeeping, simpleknowledge of marketing, product costing, familiari'ation with entrepreneurial assistance agencies andwith pro0ect financing by banks.

Frime #inister1s (o'gar 2o0ana ?F#(2@A

Frime #inister1s (o'gar 2o0ana was launched on 8nd October 3>>H to assist educated unemployedyouth to set up self$employment ventures. "t relates to the setting up of the self employment venturesin all economically viable pro0ects ?except direct agricultural operations@. The cheme also seeks toassociate reputed non$governmental organisations in implementation of F#(2 cheme especially inthe selection, training of entrepreneurs and preparation of pro0ect profiles.

The scheme targeted for setting up of nearly = lakh enterprises and conse)uent employmentgeneration to more than one million educated unemployed youth in the last four years of the Eighthive 2ear Flan. The target for the year 844:$4I L 844I$4< under the 2o0ana has been enhanced from8.84 lakh beneficiaries to 8.I4 lakh beneficiaries per annum for creation of additional employmentopportunities in the rural non$farm sector.

waran0ayanti -ram waro'gar 2o0ana ?-2@A

waran0ayanti -ram waro'gar 2o0ana ?-2@ was launched by -overnment of "ndia in 3>>> with afocus on providing effective self employment through self help group approach and activity clusterapproach for rural poor families below poverty line. The self help groups are motivated throughtraining and capacity building for taking up thrift and credit activity and start their own small ruralenterprises through the financial assistance of (evolving und ssistance.

The cheme also seeks to associate reputed non$governmental organisations in implementation of-2 cheme (ural Employment -eneration Frogramme ?(E-F@A On the basis of recommendationof the ;igh Fower Dommittee submitted in #ay 3>>:, headed by the then Frime #inster of "ndia, theKC"D launched (ural Employment -eneration Frogramme ?(E-F@ with effect from 3st /ov 3>>I,for generation of two million 0obs under the KC" sector in the rural areas of the country.

The main ob0ectives of (E-F are a@ to generate employment in rural areas, b@ to developentrepreneurial skill and attitude among rural unemployed youth, c@ to achieve the goal of rural

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industriali'ation, nd d@ to facilitate participation of financial institutions for higher credit flow torural industries. The (E-F scheme is applicable to all village industries pro0ect set up in rural areas.The eligible agencies under the scheme are ?i@ individuals ?rural artisans9entrepreneurs@ ii@ institutionscooperative societies, Trusts L ;-s for pro0ects up to (s. 8I.44 lakhs.

6nder the scheme, the borrower is re)uired to invest her9his own contribution of 34 percent of the pro0ect cost. "n case of D9T and other weaker section borrowers, the beneficiary1s contribution will be I5 of the pro0ect cost. +anks will sanction >4 percent of the pro0ect cost in case of generalcategory borrowers and >I percent of the pro0ect cost to the weaker section beneficiaries9institutionsand disburse full amount of the loan. fter the sanction of the credit facility by the +ank branch,eligible amount of #argin #oney will be kept in Term &eposit of two years in the account of the

borrower at the leading bank branch, which will be credited to the borrower1s loan account after a period of two years from the date of first disbursement of loan.


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@. 3ASIC IN)RASTRUCTURE )OR RURAL ENTREPRENEURSHIP

"nfrastructure plays a significant role in providing and enabling encouraging atmosphere for thegrowth and spread of rural enterprises and small industries.

The achievement of an J percent growth rate envisaged in the ive 2ear Flans will re)uire industrysector growth of over 34 percent, with at least a corresponding growth in demand for infrastructure. "n"ndia, serious problems have been building up in the infrastructure sector for many yearsA in transportrail efficiency is low, there has been under$investment and freight rates are high in order to subsidi'e

passengers.

The basic infrastructure includes transport, utilities and communication including railways, roads, ports, power, and telecommunication services. dditional infrastructure facilities that are also re)uiredare drinking water, housing, healthcare, among others.

Transport7 Poer an" Co$$uni0ationA well knit and coordinated system of transport plays an

important role in the sustained economic growth of a country. Transport system forms the ma0or basicinfrastructure re)uired for harnessing the potential of rural entrepreneurship. mong the transportsystems1 several modes, rail and road are important while ports also play a ma0or role in some cases.

Rai!asA (ailways provide the principal mode of transportation of freight and passengers. (ailways with its vast network spread all over the country play a vital role in the economic, industrial and socialdevelopment of the country. The revenue freight traffic, being at I 3J.= million tonnes in 8448$4H andincreasing substantially from then on, is the backbone of industrial growth and caters to improving the

performance and profitability of small industries.

Roa"sA "ndia has one of the largest road networks in the world aggregating to about H.H8 million kilometers by 844:$4I. The country1s road network consists of national highways, state highways,

ma0or9other district roads and village9rural roads. /ational ;ighways, comprising only 3.=5 of thehighway network, carry :45 of the traffic, and another :45 is carried on tate ;ighways and ma0ordistrict roads comprising 385 of the system. +ut it is connectivity at local levels which has thegreatest impact on rural development and poverty alleviation. Over one$third of the villages in thecountry are not connected by all$weather roads.

The expected share of roads in total traffic would be


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"nvestment in infrastructure in general ?roads, electricity, and communications@ also reduced poverty by enhancing agricultural, productivity growth, thus increasing farm incomes and expanding the non$agricultural sector.

PoerB -eneration and distribution of electricity from various sources has a catalytic role in

development of rural enterprises. ccelerated (ural Electrification Frogramme ?(EF@ envisages at providing supply of electricity for production oriented activities like rural industries, minor irrigationand electrification of villages.

To give impetus to rural electrification, the -overnment is paying special attention to creation andaugmentation of (ural Electricity &istribution +ackbone and Cillage Electricity "nfrastructure so as tocover all the un$electrified villages and rural households in five years. (ural Electricity upplyTechnology #ission ?(ET@ has been set up to oversee the implementation of schemes under (EF.

The Electricity ct, 844H enacted with a progressive outlook has envisaged a provision of license$freegeneration and distribution in the rural areas and regulation of power supply throughout the country.

The (ural Electrification Dorporation 7imited ?(ED@1s current mission is to facilitate availability ofelectricity for accelerated growth and for enrichment of )uality of life of rural and semi urban

population and to act as a competitive, client$friendly and development oriented organi'ation forfinancing and promoting pro0ects covering power generation, power conservation, power transmissionand power distribution network in the country. de)uate and uninterrupted regular power supply willaugment the growth of small industries and enterprises in rural areas.

Te!e0o$$uni0ationA The telecommunications services form the core area of infrastructure development today with the thrust on e$governance up to district, tehsil and -ram Fanchayat levels.Telephones have become omnipresent with installation of more than H=444 electronic telephoneexchanges by the government.

The results have been dramatic. fter decades of constraints, tele$density rose from 3.I= per 344 persons in 3>>3$8 to :.: in 8448 ?including mobiles@. The target for direct exchange lines in the /inthFlan was achieved. Dapacity grew by 885 p.a. sufficient to sustain new telecoms$based industriessuch as call centres $ and costs fell. Dontractual and regulatory constraints on the private sector wereeased in the light of experience. There is still a marked difference between rural and urban areas, withtele$density being 3.3: in rural areas against 34.3< in urban. One third of villages have no phone lines.

Domputeri'ation of 7and (eforms ?D7(@ was started as a centrally sponsored scheme in 3>JJ$J> on a pilot basis in eight districts in eight states to remove the problems inherent in the manual system ofmaintenance and updating of land records and to meet the re)uirements of various groups of usersS

people, planners and administrators. The D7( scheme is extended to about H

tehsils or taluks.

S0he$e o )un" or Re5eneration o Tra"itiona! In"ustries ;S)URTI


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>. ANA*IN* A RURAL ENTREPRISE

rural entrepreneur attempts at managing his enterprise through three sets of enterprise management

functionsA primary, production management and financial management functions.

fter launching a rural enterprise, various entrepreneurial activities are taken up by the entrepreneurfor optimi'ing resource use, maximi'ing profits and enhancing the efficiency of running theenterprise. o he engages himself in producing and marketing products. ;e has the simple goal ofmaking the unit economically viable and sustainable.

;ence managing the enterprise assumes greater importance to achieve efficiency and to make profitson a continuous basis. o managing a rural enterprise becomes the top priority of the entrepreneur.Organi'ing resources $men, money and materials for production, processing, packaging, andmarketing of goods is the essence of managing an enterprise. Dhoosing and upgrading appropriate

technology is also a key factor for the success of the enterprise.

"n managing a rural enterprise, following aspects are considered as constituents of the unitA scale ofoperation, de$risking through trials, sourcing supply of inputs, working capital, operating cycle,adopting a gradual growth of production, supervising cash flows and )uality control, using availableidle capacity, managing waste, and checking pilferage.

Enterprise management is the process of planning, organi'ing, controlling and budgeting of the worksof a rural enterprise. Enterprise management comprises various management practices $ planning forlong$term and short$term goals, organi'ing production or services, arranging working capital foroperating cycles, coordination of all enterprise activities, marketing, decision$making, delegating,controlling, monitoring and supervising, managing cash flows and finance management, book$keeping

including writing balance sheet and income statement for budgeting.

a. PRIAR( ANA*EENT )UNCTIONS

%henever a new entrepreneur attempts at launching a new venture $ a small industry or an enterpriseor business in rural areas, she needs to understand the key functions of running and managingenterprise to attain entrepreneurial success.

The new entrepreneur has to have a clear vision for his enterprise and plan for achieving long$termgoals. o planning is the most essential of all the primary management functions. The decision$making about the choice of product line and technology to be used is also very important. Then

organi'ing production 9services is another essential aspect that the entrepreneur has to think of.Organi'ing involves resourcing the enterprise, which includes arranging for men, money and materialresources for starting production work. taffing, i.e., recruiting and selecting suitable manpower to runthe enterprise, is yet another primary aspect for the entrepreneur$manager.

The primary management functions include most essential functions, such as planning, decision$making, organi'ing and staffing.

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Te0hno!o5 Choi0eB

ppropriate choice of technology plays a significant role in getting better product )uality and marketshare. spice manufacturer had installed an imported machine that enabled him to powder the spicesat low temperatures so that the )uality is not affected, which otherwise normally happens with the

indigenous machines because of heat generated in the grinding process. Dosts may increase in suchcases but it is the )uality of final product that gets an entrepreneur the money back.

uccessful entrepreneurs usually end up taking decisions that yield desired results and may prove to be right in retrospect. o, practicing appropriate decision$making in their enterprises may be one ofthe reasons for their entrepreneurial success.

Or5ani9in5 Pro"u0tionSer#i0es

rural entrepreneur needs to organi'e the production process or service operations for achievingentrepreneurial success. o he9she starts installing the e)uipment and machinery, organi'es space andsets up the enterprise according to the pro0ect proposal.

#anaging a rural enterprise involves looking after production processes to ensure )uality control andwastage reduction. o, technically trained entrepreneurs spend more time in close and directsupervision of the production process. Those people who bad prior experience of working in a productline also give special emphasis to production process. o, they assume that production is crucial partof small$scale enterprises and feel that time devoted to .production never goes waste.

The entrepreneur$manager also takes care of raw material supplies and studies the raw materialmarket, explores for new dealers and spends a lot of time for getting better raw materials andcomponents for the enterprise. The organi'ing function of managing a rural enterprise evolves into anexpertise and speciali'ed field for entrepreneurs because this is one area of enterprise control where

costs can be controlled.

de)uate experience and enough knowledge about all the raw material components re)uired and theirsources to get them at competitive prices is another essential feature of successful management of anenterprise. -etting to know the reliable supplier of raw materials does not happen in a day or two. "tinvolves many trials and tests and is )uite painstaking. good manager believes in simple truthsA !/o

pains, no gainsU!

Stain5

n entrepreneur, in an attempt to launch a new enterprise, creates employment not only for himself but also for many others $ skilled as well as unskilled labour. The staff including workers, technicians,mechanics, foremen, supervisors, managers, etc., is the most essential of all resources for running the

production process and reali'ing the dream pro0ect of the enterprise.

(ecruiting and selecting the staffA This is most critical aspect for the entrepreneur who has to selectonly those people who not only provide necessary skills and competencies for the enterprise and butalso share her9his dream, values, standards of excellence and )uality products or services. +ut gettingthe re)uired people is always a difficult task for the entrepreneurs.

#anagerial taffA They usually take in a few of their own family members in management cadre formany reasons, such as convenience, familiarity, understanding and being less risky. +ut the

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experience has shown that this has yielded mixed results. "n some cases, the relatives managed tocooperate with each other, while in others, tensions caused even closure of the enterprises. #ost of theentrepreneurs depend on the primary relationships because they adopt an adaptive mode ofmanagement, which may not allow for professionalism to a great extent.

(etired government officials or middle$aged persons offer their services for managerial 0obs in smallindustries, but usually prove to be misfits due to unrealistic expectations and mismatched performancestandards.

#ost of the managerial staffs possess very little experience as the entrepreneurs of small$scaleindustries find it difficult to attract experienced managerial personnel. They often learn their 0obaccording to the exigencies without much prior practical training.

&ue to shortage of management staff, it is imperative for the entrepreneur$owner to also handle other1s 0obs to ensure that the work does not get held up in case someone is absent.

#anagers have also to be recruited suiting their abilities and temperament. good manager diagnosesthe problem ob0ectively and does not get carried away by emotions and tempers. imilarly the capableand competent supervisors and foremen on the shop floor make a great difference in production

performance and )uality control.

Training the unskilled labourA -etting the skilled labour may become difficult as the better skilled people may not opt for working in a rural industry. +ut the unskilled labour may take long time asthey learn everything on the 0ob and through experience may ac)uire necessary skills. "n such cases,where skilled labour are hired from outside, they may soon )uit for better opportunities elsewhere. owhen these people leave the enterprise, the lower level unskilled labour may take over operations withmixed results.

"n the process, the enterprise slows down and suffers.

The lower skilled or unskilled labour force are usually not provided any technical training for the fearof losing them as they may leave for better options after ac)uiring the training. de)uate speciali'edtraining needs to be given to the employed man power for running the machinery in order to developmasters of some specific tasks. Employed staffs need to be observed critically for their competenciesand weaknesses and they need to be assigned tasks accordingly, and developed appropriately to

become experts in a particular field. Otherwise, the employee may become 0ack$of$all$trades butmaster of none.

/. PRODUCTION ANA*EENT )UNCTIONS

The production management functions include those functions in running the enterprise, such as production management, arranging working capital for operating cycles, assessing the break$even point, and marketing of products9services.

Pro"u0tion ana5e$ent

Froduction management is the process of arranging and allocating work, men, money, and materialresources in such a structured manner to achieve the twin goals of an enterprise $ reducing costs andincreasing profits. Once an enterprise is set up, i.e., once the entrepreneur has organi'ed space,

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machinery, e)uipment, and other fixed assets, and also recruited and selected re)uired work force, shewould start production. he9he is ready and set to start operations of her9his enterprise.

The entrepreneur needs working capital for starting production. he tries to understand the operatingcycles of production assesses working capital re)uirements and sets about producing goods. o s9he

needs to understand operating cycle, %orking capital, etc.

Then the new entrepreneur would make attempts at production, engages in trial production$ andadopts a pricing policy based on the costing of making the products

%orking DapitalA n entrepreneur needs finance for various operating expenses. he needs to buy rawmaterials, consumables, packaging materials, etc., and needs money for salary and wages, rent,

premium and other services. o, in order to cover all these, expenses she would need money, which isknown as the working capital.

This money can be recovered once the entrepreneur sells the finished goods. Till that time, the fundsgets locked up in the production process. o, working capital can be defined as the amount of capital

perpetually locked up in the form of current assets vi'. raw materials, work$in$progress, finishedgoods, credit may lead to wrong decisions and result in a chaos in the enterprise, which tin be easilyavoided given and cash re)uired to sustain a specified level of activity in terms of production andsales.

To find out the re)uirement of working capital, one needs to understand the concept of operatingcycle.

Operating DycleA One needs to buy and maintain the stock of raw materials for a certain minimum period. This will depend upon various factors like nearness of the market, cost of procurement,availability of the raw materials and their shelf life. The stocking period will vary from a day to even

I$< months.

To convert the raw material into finished products will also take certain time. This will depend uponthe process involved and timely availability of all the needed resources.

Once the product is ready it has to reach the buyers and in return the sale proceeds are to be collected.This also takes some time depending upon the demand and terms of sales.

The time taken for all the three stages above, i.e., the stocking period, production time and salesreali'ation time put together constitute an operating cycle of the business. The working capital is thetotal funds re)uired to meet all the expenses of one operating cycle.

6sually, the small entrepreneurs consider the production expenses only as working capital. Theyneither consider the stocking period nor presume the sales reali'ation time. o it is very important tounderstand the concept of operating cycle and calculate the working capital re)uired for the entire

period. nd working capital is the sum total of all operating expenses for the period of one operatingcycle.

%orking capital management is the most dynamic concept of financial management in an enterprise.Effective working capital management would lead toA

a@ 7ower investment of finance in working capital for a given activity level.

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b@ Effective management of cash, which is an idle investment.

D@ (eduction in cost of production as a result of lower investment of finance in working capital.

Operating cycle should be as fast as possible so that the working capital is re)uired for only a short

period of time as it incurs interest costs. aster operating cycles also enable more number of operatingcycles and greater volume of production.

ar6etin5 ana5e$ent

#arketing is perhaps the most crucial of all management functions in rural enterprise management. "fthe entrepreneur can understand the preferences of customers and adopts an effective strategy formarketing and selling, distributes products and services directly or through agencies to customers,then probability of success is very high. good entrepreneur makes prior agreements for assuredmarketing and adopts an effective marketing strategy and thus earns profits through marketing.

#arketing involves assessment of the needs of customers, a good pricing policy, promotional andadvertising approach and distribution system, and finally good profit.

;ence, a customer is the focus point of all marketing management and strategies.

The customers decideA

%hat they want and need,

%hat they will pay for the product or service to satisfy that need, and

%here and from whom they will buy it.

;ence the customer is focused in marketing and promotion strategies. The entrepreneur needs tounderstand that marketing is the backbone of one1s enterprise as this alone can bring in cash for further

production and sustenance.

ince marketing is assumed to be crucial to entrepreneurial success, marketing management needs to be taken up ardently by the new entrepreneurs.

0. )INANCIAL ANA*EENT )UNCTIONS

The financial management functions include those functions that deal with handling cash andfinances, costing, pricing, break$even analysis, managing cash flows, accounting and book$keeping,writing a balance sheet and income statement for budgeting.

inancial management is a very important area of control. "t involves management and long$termfinance for establishing enterprise, expansion and growth as well as short$term finance for gettingworking capital. Froper estimation and management of finances for the enterprise are necessary forthe success of any enterprise.

Costin5


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Dash inflow from sales depends on the method of payment to be expected. This is because credittrading has the effect of shifting cash flow into a later period than the date of actual sales. "n cashoutflow the actual payment is considered, depending on the credit terms arranged with the materialsuppliers, as this will allow payment some time after the delivery of raw material. "f a business is tokeep out of trouble, it must have enough cash inflow to pay day$to$day expenses like wages, suppliers,

rent and electricity, etc.

#onitoring cash flows and ensuring smooth flow of cash forms one of the healthy practices of anentrepreneur. healthy cash flow and finance management would ensure healthy enterprise andthereby entrepreneurial success.

A00ountin5 an" 3oo6-6eepin5

Every new entrepreneur is advised to form a system of maintaining books of accounts and recordsfrom inception. (ecording all accounts regularly is a routine work that may be monotonous and boring

but its worth can only be seen in its absence. bsence of a system of accounting is one of theimportant reasons of failure. ccounts are eyes of business and show the economic condition and

financial health of the business very clearly.

+ook$keeping or maintaining a record of all accounts of the enterprise $ the expenditure incurred, thewages, the payments due and the overall income$expenditure$profit details help the entrepreneur toassess the financial health and financial discipline of the enterprise.

"f an entrepreneur is keeping all records of vouchers, bills, account slips, etc. in various cash booksand registers, then she is practicing book$keeping for her9his enterprise and also running the enterprisein a systematic manner. uccessful entrepreneurs resort to regular counting and book$keeping of theirenterprises which provides ready data on finances and may guide them in making appropriatedecisions and running their enterprises efficiently.

+alance heetA +alance heet describes the enterprise1s financial condition at a given point in time, interms of its assets, liabilities and net worth. The successful entrepreneurs usually write their balancesheets on a regular basis and may turn out to be good enterprise managers and hence achieve successin their entrepreneurial ventures. The unsuccessful entrepreneurs, more often than not, do not prepareany balance sheet whatsoever.

"ncome tatementA "ncome statement summari'es the enterprise1s financial capability. nentrepreneur, after all, works to earn an income from her9his enterprise. "f she is not aware of howmuch she had earned over a period of time, she is not in a position to decide whether to continue orstop or change the course of action. Through an income statement, the entrepreneur will have a fairidea of the operational costs, cost of products sold, administrative expenses taxes and interests paid,

and the net income earned. The income statements of over a period of years or cycles of productionwill also help the entrepreneur to actually know whether there are incremental gains or losses inher9his enterprise.

Effective financial management practices form the core of managing a rural enterprise. The ruralentrepreneurs need to grasp the intricacies of costing, pricing and breakeven analysis in order to attainentrepreneurial success.

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SOURCES O) )UNDS

/ormally an entrepreneur tries to meet at least part of the funds re)uirement from oneSs ownsources, which we call as capital of the promoter. ;e9she arrange this fund either fromfriends, family members or from own saving. "n most cases it is founds that this funds is )uit

insufficient to run the business. Therefore he approaches various agencies for meeting there)uirements.

The credit and landing agencies operating rural areas can be divided into two typesA$

"nstitutional /on$ "nstitutional

The former comprise commercial banks, co$operative societies, development banks, regionalrural banks and non banking financial companies. These institution operate in regulatedenvironment and observe fixed norms L guidelines enumerated by the government. incethey are more amenable to policy prescriptions of government authorities they have fixedcriteria on rate of interest, primary L collateral securities L selection procedures.

The non institutional agencies are lending agencies operating in non formal manner. They aremostly money lenders operating in rural areas. They are only lending agencies before theentry of institutional agencies. (ural people have easy access to these sources of finance, asthere are no (ules L regulations guiding their activities. They charge very high rate ofinterest and many of them take away the entire property of the poor people which is pledge bythem for granting loans of even very small amount.

"nstitutional financial is of three typesA$

+anking "nstitutionalA$ Dommercial banks, co$operative societies, (egional (ural +ank.

&evelopment banksA$ mall industries development bank of "ndia?"&+"@ , /ational +ank ofgricultural and (ural &evelopment +ank ?/+(&@, /ational ;ousing +ank ?/;+@

/on banking financial companies

T(PES O) CREDIT )ACILITIES A,AILA3ALE TO RURAL ENTREPRENEUR

Dredit facilities can be fund based or non fund based. "n case of non fund based facilities bank do not lend funds directly. They issue 7etter of -uarantee and letter of Dredit ?7D@,which are simply commitments on the part of the bank to pay for the borrower in case ofcontingencies.

und based facilities are those where banks have to land funds directly. "t include

Dash Dredit ?for %orking capital (e)uirement@

Term 7oan ?for appearing ixed ssets@

+ridge 7oan ?short term finance@


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attention to all aspects of managing the enterprise. #oreover, she can easily diagnose what wentwrong and where. Time management also assumes significance as proper distribution of time

proportionately among all aspects of enterprise ensures success.

#any of the successful entrepreneurs, even though they delegate some specific works to supervisors

in their enterprises, are not entirely happy with the process of delegation. They would insist that theresponsibility still rests with them in ensuring the completion of some works and )uality of

products9services. To give an example, the poultry farmers rarely delegated the technical tasks likevaccination of birds at regular intervals as it involves high level of skill and its poor performance mayresult in high losses. On the other hand, a low skill task with low risks like 1daily feeding of birds1 wasoften delegated to the workers.

Super#isin5

upervision may be defined as the art of directing the effort or harnessing the energy of humanresources of the enterprise for the attainment of enterprise goals. upervision involves directing,delegating and controlling functions of a manager, Dlose and direct supervision is essential formaintaining )uality control.

Ruality DontrolA Ruality conscientiousness is another aspect that fetches more monetary returns."mproving )uality of products by redesigning and using better components is possible only when theentrepreneur herself9himself spends ade)uate time with workers on shop floor, diagnosing problemsand immediately correcting them, and by getting directly involved in the manufacturing process.

To ensure )uality, mid$way in the process of manufacturing various components, the entrepreneurconducts various tests, because improper components may not be useful to assemble better final

products.


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&. PIT)ALLS IN ANA*IN* A RURAL ENTERPRISE

promoter of a rural enterprise faces a plethora of problems, usually called 1teething troubles1 whenhe9he sets up her9his enterprise. irst, arranging working capital becomes the ma0or task as she runsout of money to buy raw materials though she may not yet have earned any reputation in the market to

get raw materials on credit. imilarly, she makes several production trials, refines the finished products, improves )uality, attempts to set a price for her9his products, etc. "n the process, she learnsfrom the customers and distributors about the preferences and prices.

Co$$on Pita!!s

person who does not believe in long$term strategic plans but gets entangled in daily chores ofrunning the enterprise usually meets with failure for lack of preparedness for future eventualities.mong rural entrepreneurs, the practice of strategic planning is found to be )uite inade)uate. incethe rural people, in general, have often fallen victims to vagaries of monsoons, prices and otheruncertainties, they seldom venture to think of future plans and are usually ill$prepared for any

contingencies. They were also found to be confusing the term strategic planning with daydreaming.The usual dictum is !&o not count your chickens before they are hatchedU! +ut successfulentrepreneurs believe in !;ope for the best, but prepare for the worst!, and hence success. #ost of themanagerial staffs recruited have very little experience. They often learn their 0ob according to theexigencies without much prior practical training. ;owever, the scope for speciali'ation is limited. &ueto shortage of managerial staff, it is imperative for one to handle other1s 0obs to ensure that work doesnot get held up in case someone is absent. The managerial 0obs are plural in nature to a greater degreein the small$scale sector than in the medium and large$scale industries.

"n cases where the scale of operation of an enterprise has increased, small$scale industries are alsostarted as 0oint ventures with two$or more partners. +ut partnerships may yield mixed results. %hilesome units survive because of committed partnerships, others have failed due to lack of understanding

between partners. good deal of mutual faith, maturity and complementary support are essential forsuccessful partnership in enterprises. n entrepreneur needs to look beyond into future with long$termgoals in mind. narrow outlook, inferiority complex and lack of patience and lack of exposure will begreat impediments for enterprise development. #erely thinking of limited gains will not make asuccessful entrepreneur. uspicion and 0ealousy may not find place in a partnership venture.

#ost of the rural entrepreneurs are not serious with the practice of organi'ing resources for production9services for their enterprises. 6sually, they take it for granted this crucial issue oforgani'ing inputs, money and other key resources because they take up only familiar entrepreneurialactivities on which they have ade)uate command and knowledge.

They find organi'ing of resources as an easy and routine affair and conduct themselves in a 1businessas usual1 manner. #ost of the entrepreneurs supervise their production work by themselves. ;owever,they have to learn to delegate various responsibilities to their partners and subordinates. Otherwise,they tend to get bogged down in one aspect of production at the cost of ignoring some other crucialaspect of managing the enterprise and so productivity may decline.

The small entrepreneurs usually do not prepare long$term plans. They often believe that their ideascannot be implemented for want of resources. ;owever, it is the inade)uate understanding of theintricacies of business and lack of proper planning which hampers their dreams. 6sually they learn the

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basic principles of financial management from their own mistakes. "n the process, many of them bumtheir fingers and get disheartened in the beginning.

Even if they know their 0ob and business skills, they are not able to reflect upon the mistakes of the past. Ruite often in the absence of records, the access to formal credit facilities is also denied. o it is

important for them to learn and adopt the principles of financial management as well as maintain thenecessary records.

#anaging cash flows poses a great challenge for the entrepreneurs. &elayed cash flow is a big pitfallwhich may not be avoided by even the best of entrepreneurs. imilarly large gaps are seen in theunderstanding the operating cycle and working capital re)uirements by the new entrepreneurs. neffective manager$entrepreneur will take special care of cash flows in running one1s enterprise.


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Documents

26661470 Rural Entrepreneurship in India