CBSE Class 11 Business Studies Chapter 9: Small Business NCERT Solutions

Solution: The size of a business can be determined using several key parameters. These indicators help classify businesses into different categories, such as small, medium, or large. The primary parameters include:

1. Number of workers employed: A higher number of employees generally indicates a larger business operation.
2. Size of plant and machinery: The value and scale of the equipment and machinery used in production are significant indicators of business size.
3. Total output: The quantity of goods or services produced over a specific period reflects the scale of operations.
4. Inventory size: The value or volume of raw materials, work-in-progress, and finished goods held by the business can also indicate its size.

Solution: The Government of India defines Small Scale Industries (SSIs) primarily based on the investment made in plant and machinery. The criteria have evolved over time, but generally, they distinguish between various types of small enterprises. Here's a breakdown based on the provided information:

• Small Scale Industry: Typically defined by an investment limit, which is currently ₹ 1 crore. However, for a specific set of 71 products, this limit is extended up to ₹ 5 crores.
• Ancillary Industry: These units must supply at least 50% of their output to a parent unit and have an investment limit of ₹ 1 crore.
• Tiny Enterprise: Characterized by a maximum investment of ₹ 25 Lakhs in plant and machinery.
• Service and Business (Industry related Enterprise): These have an investment limit of ₹ 10 Lakhs.
• Women Enterprise: This category applies if 51% of the holding is owned by women and managed by them, adhering to the investment limits of the other categories (SSI, Ancillary, Tiny, etc.).
• Export Oriented Units (EOUs): Generally have an investment limit of ₹ 1 crore. 100% EOUs are allowed to sell up to 25% of their production in the domestic market.

Solution: Ancillary units and tiny units are both types of small-scale enterprises, but they differ significantly in their definition, obligations, and investment limits:

Ancillary Industrial Units:

• Definition: These are industrial units that are required to supply a minimum of 50% of their total production to one or more parent industries.
• Obligation: They have a specific obligation to cater to the needs of larger parent companies.
• Investment Limit: The maximum investment allowed in plant and machinery is ₹ 1 crore.
• Examples: Industries producing machine parts, tools, or intermediate products that are essential components for larger manufacturing firms.

Tiny Units:

• Definition: These are businesses where the investment in plant and machinery does not exceed ₹ 25 Lakhs.
• Obligation: They do not have any specific obligation to supply to parent industries.
• Investment Limit: The maximum investment is capped at ₹ 25 Lakhs.
• Examples: Small shops, boutiques, STD booths, photocopy centres, and other small service or retail businesses.

Solution: Cottage industries are a traditional form of small-scale production, often found in rural areas. Their key features include:

• Ownership: They are typically owned and operated by individuals or families, utilizing their own resources and capital. These are essentially rural-based, privately owned ventures.
• Capital and Technology: Cottage industries generally require very low capital investment. The production techniques are usually indigenous, simple, and highly labor-intensive, relying on traditional skills rather than advanced machinery.
• Employment: These industries primarily employ members of the owner's family. Hiring external labor is less common, making them a source of household income.
• Skills and Talent: The skills required for cottage industries are often specific and passed down through generations within families. For example, pottery skills are traditionally held within potter families.
• Market Reach: While some production might be for self-consumption within the household, a portion is typically sold in local markets to generate income.

Solution: Small-scale industries (SSIs) are fundamental to India's socio-economic progress. Their contributions are multifaceted:

• Market Share and Exports: SSIs constitute a vast majority (around 95%) of industrial units in India. They significantly contribute to the Gross Industrial Value Added (approximately 40%) and play a vital role in the country's foreign exchange earnings through exports (around 45% of total exports).
• Regional Balance: Due to their lower capital requirements and use of basic technology, SSIs can be established in any part of the country, including rural and underdeveloped areas. This helps in reducing economic disparities between different regions and promotes balanced industrial development.
• Employment Generation: SSIs are inherently labor-intensive, meaning they create more jobs per unit of capital invested compared to large industries. The skills required are often general, making them accessible to a broader segment of the workforce and thus significantly boosting employment opportunities.
• Wide Range of Products: These industries produce a diverse array of goods, catering to various consumer needs. This includes everyday items like stationery and matches, traditional crafts, processed foods, and even some technologically driven products such as calculators and electronic components.
• Customized Goods and Flexibility: Small industrial units are highly adaptable. Their flexible production techniques allow them to quickly respond to specific consumer demands and preferences, offering customized products that larger industries might find difficult to produce efficiently.