Question

NCERT Solutions Class 11, Business Studies, Chapter- 9, MSME and Business Entrepreneurship 

In today's business world, it's important to understand Micro, Small, and Medium Enterprises (MSMEs) and their role. The NCERT Class 11 Business Studies syllabus covers this topic under "MSME and Business Entrepreneurship," exploring what MSMEs are, their importance in the economy, and the traits of successful entrepreneurs. This article offers a clear overview of the chapter and includes expert-developed solutions to the exercises. These solutions follow the latest CBSE guidelines and aim to simplify complex concepts, helping you prepare effectively for your exams.

In these NCERT Solutions for Class 11 Business Studies, we have discussed all types of NCERT intext questions and exercise questions.

Concepts covered in Class 11 Business Studies chapter- 9 MSME and Business Entrepreneurship , are :

• Micro, Small and Medium Enterpris (MSME)
• Role of MSME
• Problems Associated With MSME
• MSME and Entrepreneurship Development
• Intellectual Property Rights (IPR)
• Trademark
• Geographical Indication
• Semiconductor Integrated Circuits Layout Design

Our NCERT Solutions for Class 11 Business Studies provide a comprehensive resource for students, featuring in-depth explanations, practice questions, and real-life examples to deepen understanding and aid in effective preparation. Utilizing these solutions helps students develop a solid grasp of business concepts and achieve success in their academic endeavors.

You can now easily access all the solutions and practice questions to kickstart your studies!

Answer 1

NCERT Solutions Class 11, Business Studies, Chapter- 9, MSME and Business Entrepreneurship

​Very Short Answer Questions

1. Which year the MSMED Act passed?

Solution:

The MSMED Act was passed in the year 2006.

The Micro, Small and Medium Enterprises Development (MSMED) Act of 2006 was formed to facilitate promotion and development and enhance the competitiveness of micro, small, and medium enterprises and for matters connected therewith or incidental thereto.

2. What is the micro enterprise.

Solution:

According to the Micro, Small and Medium Enterprises Development (MSMED) Act of 2006, a micro-enterprise is one with a capital expenditure in plant and machinery of less than Rs. 1 crore and an annual turnover of less than Rs. 5 crores.

3. What is a cottage industry?

Solution:

A cottage industry is a small-scale enterprise which is mostly run by family members, and the profits generated from the business is majorly used to meet the household’s daily requirements. One of the common and major examples of the cottage industry is handicrafts and textiles produced locally.

4. What is meant by Village and Khadi Industry?

Solution:

According to the regulations of the central government, Village Industries are those situated in rural areas that invest in fixed assets. Whereas, Khadi Industries are those that weave handlooms from materials such as cotton, wool, silk yarn, and so on or that weave handloom from a combination of two or all of these yarns.

As a result, Khadi and Village Industries are those that are located in rural areas and have a fixed capital investment per artisan (weaver) of less than a hundred thousand rupees. The Government of India has the authority to alter the Fixed Capital Investment at any moment.

5. Give any two characteristics of entrepreneurship development.

Solution:

Entrepreneurship can be defined as a process of setting up a new business or profession, bearing most of the risk, and enjoying most of the rewards. Two characteristics of entrepreneurship development are: 

1. Systematic Activity: Entrepreneurship is a step-by-step process. Entrepreneurs should have some skill, temperament, knowledge, and most importantly a purpose to get into entrepreneurship. It is not something that can happen by chance.

2. Lawful and Purposeful Activity: Entrepreneurship business should not be carried forward with some illegal practices. The business should be lawful and abide by all the Government’s rules & regulations. The objective of entrepreneurship is lawful business. One can not try to legitimize unlawful actions as entrepreneurship on any grounds.

Short Answer Questions

1. What is MSME?

Solution:

The size of a business in small industries and business establishments is a major issue. Several parameters can be used to measure the size of business units. These include the number of people employed in a business, capital invested in a business, the volume of output or value of the output of a business, and power consumed for business activities. The definition used by the Government of India to describe MSME is based on investment in plants and machinery.

The Indian government passed the Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006, which describes micro, small, and medium companies as follows:

1. Micro-enterprises have a capital investment of less than Rs.1 crore and a turnover that is under Rs.5 crore.

2. Small enterprises have a capital investment of less than Rs.10 crores and revenue of less than Rs.50 crores.

3. Medium-sized enterprises have a capital investment of less than Rs.50 crores and revenue of less than Rs.250 crores.

2. State the meaning of entrepreneurship?

Solution:

Entrepreneurship is the process of establishing one’s own business as opposed to engaging in any other economic activity, such as employment or practising a profession. An entrepreneur is someone who establishes his own business. The process’s output is the business unit, which is referred to as an Enterprise.

Entrepreneurship is also responsible for the creation and expansion of opportunities for the other two economic activities, that is, Employment and Profession. Every country, whether it’s developed or developing, requires entrepreneurs, whereas a developing country requires entrepreneurs to kickstart the development process, and a developed country requires entrepreneurship to sustain it. In the current Indian context, where employment opportunities in the public and large-scale sectors are shrinking on the one hand and vast opportunities arising from globalisation are waiting to be exploited on the other, Entrepreneurship has the potential to propel India to the heights of becoming a super economic power.

3. MSME and Entrepreneurship are connected. Do you agree. Give two reasons.

Solution:

Yes, MSME and Entrepreneurship are connected. The major reasons are as follows:

1. MSMEs offer banks with financing. They promote entrepreneurship and talent development by establishing specialised training institutes. MSMEs are well-known for offering genuine assistance in accessing both domestic and international marketplaces.

2. After agriculture, MSMEs are the second largest human capital employer. As compared to big industries, they create a greater number of job chances per unit of capital invested. As a result, it is an appealing place to begin for most entrepreneurs.

3. People’s skills and abilities can be channelled into business ideas that can be turned into reality with little capital investment and almost no procedures required to start a small business. As a result, for most entrepreneurs, MSME is a good starting point.

Answer 2

4. State the role of MSME in development of a country?

Solution:

MSMEs in India experience a distinct status due to their contribution to the country’s socioeconomic development. MSME development has always been an important component of India’s industrial plan. MSME development prevents rural population migration to urban areas in search of employment and contributes to other socioeconomic aspects such as income inequality decline, dispersed industrial development, and connection with other sectors of the economy.

Role of MSME in development of a country:

• Quick decisions: It enables quick and timely decisions due to the small size of the business.

• Employment Opportunities: After the agriculture sector, small-scale units provide the largest employment opportunities to the people and also facilitate optimum utilisation of resources as because of easy technology and easily available resources.

• Balance Development: The establishment of business units that rely on locally available resources, simple technology, and labour class workers enables their setup in any location or region. This approach fosters Balod development throught out the country by laverging local resources and involving diverse segments of the workforce.

• Eliminate poverty: Small-scale firms majorly adopt labour-intensive technique instead of capital-intensive ones, thus allowing them to utilise more rural labour at cheap rates. As a result, small-scale industries eradicate the hidden unemployment in the agricultural sector while offering a source of income for backward regions.

5. What are the different parameters used to measure the size of MSME?

Solution:

The size of business units can be measured using a variety of parameters, such as the number of people engaged in business, the capital invested in the business, the volume or worth of business products, and the electricity utilised for business operations. Depending on the need and the benefits or constraints of different metrics, an appropriate parameter may be used. The Government of India defines MSME based on capital investment and revenue. This measure attempts to take into account India’s socioeconomic environment, in which capital is scarce, and labour is abundant.

6. State the meaning of Village and Khadi industries?

Solution:

According to the regulations of the central government, Village industries are those situated in rural areas that invest in fixed assets. Khadi Industries are those that weave handlooms from materials such as cotton, wool, silk yarn, and so on, or that weave handloom from a combination of two or all of these yarns. As a result, Khadi and Village Industries are those that are located in rural areas and have a fixed capital investment per artisan (weaver) of less than a hundred thousand rupees. The Government of India has the authority to alter the Fixed Capital Investment at any moment.

The Khadi and Village Industries Commission (KVIC), a non-constitutional body created by the Government of India under the Parliament Act, is the main implementing agency at the national level. KVIC’s objective is to plan, promote, facilitate, organise, and support the growth of Khadi and Village industries in rural areas.

The objectives of KVIC are as follows:

• The main aim of KVIC is to establish a healthy rural community.
• Its societal goal is to provide employment in rural areas.
• The economic aim of KVIC is to produce a marketable product.
• And the main goal is to encourage self-sufficiency in economically underprivileged groups.

7. State any three major problems faced by MSMEs?

Solution:

MSMEs face significant disadvantages when compared to large-scale industries. Some of these areas are the scale of operations, availability of funding, capacity to use modern technology, and the procurement of raw materials. This causes a variety of problems. The primary problems are remote locations with less developed infrastructure, a lack of management talent, bad quality, traditional technology, and insufficient availability of capital.

The major problems faced by Micro, Small, and Medium Enterprises are as follows:

1. Finance: One of the major problems for MSMEs is the arrangement of funds required for the business. They do not have enough creditworthiness for taking funds from the capital market, so they heavily rely on local financial resources that charge them heavy interest.

2. Raw Materials: Being relatively small, MSMEs cannot buy raw materials in bulk, as they do not have their production unit at a big scale, and due to the small quantity of purchase, their bargaining power becomes relatively low. Often, sellers take large orders, and in the situation of scarcity, small business suffers the most as they do not get the raw materials.

3. Marketing: Marketing of the products is the most prominent activity as it holds the responsibility to generate revenue. In most cases, marketing is the weaker area of MSMEs as they lack the amount of money and infrastructure required for marketing.

4. Global Competition: Competitors of MSMEs are not only from the local or national market but also from the global market. It often becomes very difficult for small businesses with outdated technology and a lack of marketing to compete with big giants.

Long Answer Questions

1. How do small scale industries contribute to the socio-economic development of india? Discuss

Solution:

Small-scale industries play an essential role in ensuring the development and growth of developing countries. The following points are highlighted as their contribution to the socio-economic development are :

Employment generation: After the agriculture sector, small-scale units provide the largest employment opportunities to the people and also facilitate optimum utilisation of resources as because of easy technology and easily available resources.

Market share: Small-scale industries make up 94% of the industrial units in India. They contribute about 41% of the gross industrial value added and 44% of India's total exports.

Wide range of products: Small-scale industries produce a huge variety of consumer goods, such as safety matches, stationery items, and handicrafts. Besides, small-scale industries also produce a few products using technology, like radios, calculators, televisions etc.

Regional balance: Small-scale industries produce simple goods and use very basic technology. Furthermore, these industries do not require heavy investment; thus anyone anywhere worldwide can set up SSIs. Therefore, small industries benefit the area where it is set up and help in reducing the regional balances in industrial development among different areas of a country.

Answer 3

2. Describe the role of small business in rural India.

Solution:

The following are some of the major roles played by small-scale businesses in rural India.

(a) They generate employment opportunities: Cottage and rural industries play a significant role in providing employment opportunities, particularly to people in rural areas. This proves to be a boon especially for the economically weaker sections of the rural society.

(b) They mitigate disguised unemployment and alleviate poverty: Small-scale businesses use labour-intensive production techniques, and are, therefore, able to provide employment to the excess/surplus rural labour. Thus, small-scale businesses remove disguised unemployment from the agriculture sector and at the same time provide a livelihood to the rural people. Hence, they contribute to alleviating rural poverty.

(c) They enable equitable income distribution: The capital requirements of small-scale businesses are low, mainly because of their use of labour-intensive production techniques, and this encourages entrepreneurs to start units on a small scale. Small-scale businesses are, therefore, set up all over the country, many of them providing employment opportunities to people in rural areas. This triggers the redistribution of wealth and income and enables the equitable distribution of income in rural areas.

(d) They help accelerate growth: Small-scale businesses have been considered as a major propeller for the acceleration of economic growth and as an employment generator, particularly in the rural and backward areas of India.

(e) They facilitate rural development and reduce migration from rural to urban areas: It is well known that a large number of people migrate from rural to urban areas in search of better employment opportunities and improved living standards. Small-scale businesses help reduce this migration by providing employment opportunities to rural people in their own regions. By doing so, small units also help mitigate the excessive pressure on urban infrastructure.

3. Discuss the problems faced by small scale industries.

Solution:

The problems faced by the small scale industries are as follow:

(a) Limited Finance: Small business often struggle to secure adequate financing for their operations. They may lack creditworthiness and collateral required to obtain loans from financial institutions, leading them to rely on local money lenders who charge high interest rates. Additionally, small business may experience a shortage of working capital due to delayed payments of capital tied up in unsold inventory.

(b) Procurement of Raw Materials: Small businesses face difficulties in procuring raw materials. They may encounter issues such as unavailability of required materials, compromising on quality, or having to pay higher prices for good quality materials. Limited storage capacity restricts their ability to purchase raw materials in bulk, diminishing their bargaining power.

(c) Managerial Skills: Many small business owners lack comprehensive managerial skills necessary for running a business. While they may possess technical expertise, they may struggle with marketing and other operational aspects. Hiring professional managers may be un-affordable for small businesses, resulting in increased responsibilities for the owner.

(d) Less Productive Labour: Small businesses often face challenges in attracting and retainning talented employees due to limited resources for offering competitive salaries. This can lead to lower employee motivation and productivity. The absence of specialisation and division of labour further impacts productivity levels.

(e) Marketing: Small businesses typically face difficulties in effective marketing. They heavily rely on middlemen who may exploit them by offering low prices and delaying payments. Direct marketing may not be feasible due to a lack of necessary infrastructure and resources.

4. What measures has the government taken to solve the problem of finance and marketing in the small scale sector?

Solution:

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

(a) National Bank for Agriculture and Rural Development (NABARD): It was established in 1982 with the main objective of promoting rural development and integrating the efforts in this direction. This agency is an apex banking body that governs the operations particularly of the rural and ‘Gramin’ banks. The main focus of NABARD is to provide cheap and easy credit facility to the small, cottage and rural industries.

(b) Small Industries Development Bank of India (SIDBI): It was set up to provide direct and indirect financial assistance under different schemes. It caters to the credit and finance requirements of, especially small-scale enterprises.

(c) World Association for Small and Medium Enterprises (WASME): It is an international non-governmental organisation that addresses the problems of small- and medium-scale enterprises. It has set up an ‘International Committee for Rural Industrialisation’ with the aim of designing a model for the growth and development of rural industries.

(d) The National Commission for Enterprises in the Unorganised Sector (NCEUS): It was formed in September 2004 with the objective of improving the efficiency and enhancing the global competitiveness of small-scale industries. It focuses on addressing the problems faced by small enterprises, particularly in the unorganised/informal sector.

(e) Various development and employment generation programmes: besides establishing the organisations mentioned above, the government has launched various programmes for rural development. Among the important programmes are the Prime Minister’s Rozgar Yojana (PMRY), Integrated Rural Development Programme (IRDP) and Training of Rural Youth for Self-Employment (TRYSEM). These programmes are aimed at generating greater employment opportunities, developing rural areas and making the rural people self-reliant.

5. ‘Innovation is integral to MSME’. Discuss giving reasons to your answer.

Solution:

Due to its rapid growth and expansion, technology has become a crucial component affecting all sectors, including manufacturing, agriculture, and services. Therefore, innovations and technical breakthroughs significantly influence how industries and enterprises contribute to the nation's economic development and global expansion.
The world is changing quickly, and businesses' competitiveness must be maintained by continual innovation, including new technologies to improve quality standards and developing proper infrastructural support. To assist all firms in improving their machinery and tools, efforts have been made to develop relevant incubation units, laboratories, and specialised centres.

• Business incubators are also required to assist business persons with commercialisation to speed up the transformation of such technology from easy ideas to profitable firms that create jobs.

• To modernise technology, we need infrastructure support to allow businesses to generate novel concepts that benefit MSMEs.

• The initiatives of Ministry of MSME's initiatives is designed to inspire and support the latent creativity of individuals and the adoption of knowledge-based innovative projects.

• The Technology Centres play a vital role in helping MSME initiatives in the country by offering access to skilled labour, the latest technologies, and technical advisory by opening doors for technical skill development at all levels.

6. ‘Creativity and Innovation is the key to MSME’. Justify the statement.

Solution:

The reasons are:

1. To modernise technology, we need infrastructure support to allow businesses to generate novel concepts that benefit MSMEs.

2. The Ministry of MSME's initiatives is designed to inspire and support the latent creativity of individuals and the adoption of knowledge-based innovative projects.

3. The technology centres play a vital role in helping MSME initiatives in the country by offering access to skilled labour, the latest technologies, and technical advisory by opening doors for technical skill development at all levels.

4. The main objective is to inspire and support the latent creativity of individuals and the adoption of knowledge-based innovative projects.

5. Technology-based startups are regularly considered high-growth and high-risk businesses and need an empowering environment to improve the possibilities of success. Hence, 'Creativity and Innovation is the key to MSME'.